1. (Cash Collections) Snobby Crab Shack budgeted credit sales in the first quart
ID: 2426776 • 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
Question No 1 October November December Sales 40,000 50,000 1,70,000 Outstanding as on 31-10-2008 14,000 Outstanding as on 30-11-2008 4,000 17,500 Outstanding as on 31-12-2008 2,000 5,000 59,500 Less Baddebts Written off -2,000 - - Closing balance as on 31-12-2008 - 5,000 59,500 64,500 Cash Collection Details November Sales December Sales January Sales February Sales March Slaes Opening Balance 5,000 59,500 Sales 1,50,000 1,60,000 1,72,000 Collected on January 2,500 42,500 97,500 1,42,500 Collected on February - 8,500 37,500 1,04,000 1,50,000 Collected on March - - 7,500 40,000 1,11,800 1,59,300 Outstanding as on 31-03-2009 2,500 8,500 7,500 16,000 60,200 Less: Baddebts -2,500 -8,500 Net Outstanding - - 7,500 16,000 60,200 83,700 Question No 2 December Purchase January Purchase February Purchase March Purchase Purchases 87,000 Paid on december 47,850 Outstanding as on 31-12-2008 39,150 Closing balance as on 31-12-2008 39,150 Purchases 84,000 96,000 78,000 Paid on January 39,150 46,200 85,350 Paid on February 37,800 52,800 90,600 Paid on March 43,200 42,900 86,100 Outstanding on 31-03-2009 - - - 35,100 35,100
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