1. (Cash Collections) Snobby Crab Shack budgeted credit sales in the first quart
ID: 2427100 • 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. Snobby Crab Shack (All amounts in $) Collections from Accounts Receivable January February March From November Sales 2500 From December Sales 42500 8500 From January Sales 97500 37500 7500 From February Sales 104000 40000 From March Sales 111800 142500 150000 159300 2. Snobby Crab Shack Disbursements for Accounts Payable January February March For December Purchases 39150 For January Purchases 46200 37800 For February Purchases 52800 43200 For March Purchases 42900 85350 90600 86100 3. Snobby Crab Shack January February March Opening Cash Balance 4050 2000 2000 Cash Receipts 142500 150000 159300 Loans Taken 800 600 147350 152600 161300 Cash Disbursements To Accounts Payable 85350 90600 86100 Operating Expenses 60000 60000 60000 Loans Repaid 1400 Closing Cash Balance 2000 2000 13800 Actual Cash Balance (excluding loans) 1200 1400 15200
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