value: 2.00 points Calgon Products, a distributor of organic beverages, needs a
ID: 2445741 • Letter: V
Question
value: 2.00 points Calgon Products, a distributor of organic beverages, needs a cash budget for September. The following information is available: a. The cash balance at the beginning of September is $10,100. b. Actual sales for July and August and expected sales for September are as follows: Sales on account are collected over a three-month period as follows: 10% collected in the month of sale. 70% collected in the month following sale, and 18% collected in the second month following sale. The remaining 2% is uncollectible. c. Purchases of inventory will total $20,000 for September. Thirty percent of a months inventory purchases are paid for during the month of purchase. The accounts payable remaining from August's inventory purchases total $20000, all of which will be paid in September. d. Selling and administrative expenses are budgeted at $14,000 for September. Of this amount, $3,000 is for depreciation. e. Equipment costing $16,000 will be purchased for cash during September, and dividends totaling $4,000 will be paid during the month. f. The company maintains a minimum cash balance of $6,100. An open line of credit is available from the Company's bank to bolster the cash balance as needed. Required: 1. Prepare a schedule of expected cash collections for September. (Do not round intermediate calculations. Omit the ''$'' sign in your response.) 2. Prepare a schedule of expected cash disbursements for inventory purchases for September. (Do not round intermediate calculations. Omit the ''$'' sign in your response.) 3. Prepare a cash budget for September. Indicate in the financing section any borrowing that will be needed during September. Assume that any interest will not be paid until the following month. (Input all amounts as positive values except cash deficiency, repayments and interest which should be indicated by a minus sign. Do not round intermediate calculations. Leave no cells blank - be certain to enter ''0'' wherever required. Omit the ''$'' sign in your response.)Explanation / Answer
Expected cash collection for September
July August September October November Total
Credit sales $ 22000 34000 39000 95000
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Cash collections
- 10% in the month of sale $ 2200 3400 3900 9500
-70% in the following month of sale $ 15400 23800 27300 66500
-18% in the second month following sale $ 3960 6120 7020 17100
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Total cash collections $ 2200 18800 31660 33420 7020 93100
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Bad debts 2% of $ 95000 $ 1900
Total sales $ 95000
Total cash colletions for September is therefore $31,660.
Purchase of inventory during September $ 20000
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30 % of month purchases made in month of purchase $ 6000
August Month's purchases paid in September $ 20000
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Total disbursement for inventory purchase in september $ 26000
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Calgon products
Cash Budgets
for the month of September
Opening Cash Balance $10100
Cash collections ( as indicated in the cash collection statement ) $ 31660
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Total cash available for financing $41760
Less : disbursements
Payment to suppliers for inventory $26000
Selling and Administrative expenses $11000
($ 14000 - $3000 for depreciation )
Equipment purchase $16000
Dividend $ 4000
Total Disbursements --------------------- $57000
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(deficiency ) of cash available over disbursements $ 15240
Financing
Borrowings $21340
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Cash Balance,ending $ 6100
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Borrowing from bank is calculated by adding back the cash balance to be maintained with the deficiency.i.e.$6100 + $ 15240 = $21340.
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