Calgon Products, a distributor of organic beverages, needs a cash budget for Sep
ID: 2488868 • Letter: C
Question
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 $9,000.
b. Actual sales for July and August and expected sales for September are as shown below. Sales on account are collected over a three-month period as follows: 10% collected in the month of sales, 70% collected in the month following sale, and 18% collected in the second month following the sale. The remaining 2% is uncollectable.
July
August
September
Cash Sales
$6,500
$5,250
$7,400
Sales on Account
$20,000
$30,000
$40,000
Total Sales
$26,500
$35,250
$47,400
c. Purchases of inventory will total $25,000 for September. 20% of a month’s inventory purchases are paid for during the month of purchase. The accounts payable remaining from August’s inventory purchases total $16,000, all of which will be paid in September.
d. Selling and Administrative expenses are budgeted at $13,000 for September. Of this amount, $4,000 is for depreciation.
e. Equipment costing $18,000 will be purchased for cash during September, and dividends totaling $3,000 will be paid during the month.
f. The company maintains a minimum cash balance of $5,000. An open line of credit is available from the company’s bank to bolster the cash position as needed.
Prepare a schedule of expected cash collections for September.
Prepare a schedule of expected cash disbursements during September for inventory purchases.
Prepare a cash budget for September. Indicate in the financing section any borrowing that will be needed during September
July
August
September
Cash Sales
$6,500
$5,250
$7,400
Sales on Account
$20,000
$30,000
$40,000
Total Sales
$26,500
$35,250
$47,400
Explanation / Answer
Calgon Products All Amounts in $ Schedule of Expected Cash Collections for September September Collections from Cash Sales 7400 Collections from Credit Sales July 3600 August 21000 September 4000 28600 Cash Collections in September 36000 Schedule of Expected Cash Disbursements during September for Purchases September Payments for August Purchases 16000 Payments for September Purchases 5000 Disbursements for Purchases 21000 Cash Budget for the month of September Opening Cash Balance 9000 Loan Taken 11000 Collections from Customers 36000 56000 Less : Disbursements for Purchases 21000 Less : Selling and Administrative Exp 9000 Less : Purchase of Equipment 18000 Less : Dividends Paid during the month 3000 51000 Closing Cash Balance 5000
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