1. (Cash Collections) Snobby Crab Shack budgeted credit sales in the first quart
ID: 2426688 • Letter: 1
Question
1. (Cash Collections) Snobby Crab Shack budgeted credit sales in the first quarter of 2009 to be as follows:
January $150,000
February $160,000
March $172,000
All sales are on account. Credit sales in October 2008 were $40,000, November 2008 were $50,000 and December 208 were $170,000. The company expects to collect 65% of a month’s sales in the month of sale, 25% in the first month following month of sale and 5% in the second month following the month of sale.
Estimate cash receipts for each month of the first quarter of 2009. What is the amount of accounts receivable at March 31, 2009? (Any accounts over 60 days are uncollectable and written off).
2. (Cash Disbursements) Snobby Crab Shack expects to make purchases in the first quarter of 2009 as follows:
January $84,000
February $96,000
March $78,000
Purchases in December in 2008 are expected to be $87,000. The company expects that 55% of a month’s purchases will be paid in the month of purchase and 45% will be paid in the following month. Other cash operating expenses per month are $60,000. In addition, the company has $8,000 of depreciation per month.
Estimate cash disbursements related to purchases for each month of the first quarter of 2009. What are the accounts payable related to purchases at March 31, 2009?
3. (Cash Budget) Snobby Crab Shack has a cash balance at December 31, 2008 of $4,050 and wants to maintain an ending cash balance of $2,000 per month, what is the cash balance at the end of January, February and March 2009 (assume any loans are non-interest bearing).
Explanation / Answer
1.
cash receipts January
From november month $50,000*.05 =$2,500
From december month $170,000*.25=$42,500
From January month $150,000*.65=$97,500
Total receipts $142,500
cash receipts February March
From December month $170,000*.05 =$8,500
From January month $150,000*.25=$37,500 $150,000 *.05= $7,500
From february month $160,000*.65 =$104,000 $160,000*.25 = $40,000
From the march month $172,000*.65 = $111,800
Total receipts $150,000 $159,300
Accounts receivable as on march 31 2009
$160,000 *.10 = $16,000
$172,000 * .35 = $60,200
total $76,200
2. Cash disbursements January february March
From december 87,000*.45=$39,150
From january 84,000*.55=$46,200 84,000*.45=$37,800
From february 96,000*.55=$52,800 96,000*.45=$43,200
From march 78,000*.55= $42,900
Total cash disbursement (purchase) $85,350 $90,600 $86,100
Accounts payable as on march 31 2009 = 78,000 *.45 = $35,100
3. cash budget
particulars January February March
Cash receipts $142,500 $150,000 $159,300
Cash disbursement ($85,350) ($90,600) ($86,100)
(purchase)
Other cash operating expense ($60,000) ($60,000) ($60,000)
Net ($2,850) (600) $13,200
opening cash $4,050 $2,000 $2,000
Cash balance $1,200 $1,400 $15,200
Loan $800 $600 ($1,400)
Closing cash balance $2,000 $2,000 $13,800
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