I am asking this same question 4th time with Chegg. The experts gave me totally
ID: 2491585 • Letter: I
Question
I am asking this same question 4th time with Chegg. The experts gave me totally different numbers. Specifically I am asking you to answer in words how budget numbers are interelated based on the two questions below. Please give me a competent response. Thanks.
******** PLEASE READ WHAT I AM ASKING FOR. IT SEEMS LIKE NOBODY IS READING CAREFULLY HERE. YOU DON:T HAVE TO PREPARE A BUDGET. ANSWER THE 2 QUESTIONS BASED ON A CONCEPT. THANKS. *******
Study Problem #22-6A in your homework and answer the following questions in your own words. YOU ARE NOT BEING ASKED TO PREPARE A REVISED BUDGET; INSTEAD, ANSWER THE QUESTIONS BASED ON CONCEPT AND YOUR UNDERSTANDING OF HOW THE BUDGET NUMBERS ARE INTERRELATED. ASSUME EACH OF THE FOLLOWING QUESTIONS IS AN INDEPENDENT SITUATION:
a. What would be the impact on the cash budget if 30% (instead of 25%) of credit sales is collected in the month of the sale? (Note this is the only change).
b. What would be the impact on the cash budget, if 90% (instead of 80%) of the merchandise is paid in the month following the purchase?
Problem 22-6A (50 minutes)
ONEIDA COMPANY
Cash Budget
For September, October, and November
September
October
November
Beginning balance...............................
$ 5,000
$ 99,250
$ 69,500
Cash receipts
Collection on accounts receivable*....
159,250
249,250
338,100
Receipts from bank loan.....................
100,000
_______
_______
Total cash available.............................
264,250
348,500
407,600
Cash disbursements
Payments on accounts payable**........
100,000
217,000
228,000
Payroll................................................
20,000
22,000
24,000
Rent....................................................
10,000
10,000
10,000
Other expenses...................................
35,000
30,000
20,000
Repayment on bank loan....................
100,000
Interest on bank loan***......................
________
________
3,000
Total cash disbursements...................
165,000
279,000
385,000
Ending cash balance............................
$ 99,250
$ 69,500
$ 22,600
*** Interest at 12% on $100,000 for 3 months is $3,000.
Supporting schedules
Collections of credit sales*
August
September
October
November
Aug. sales ($215,000)—[25%: 45%: 20%: 9%].........
$ 53,750
$ 96,750
$ 43,000
$ 19,350
Sept. sales ($250,000)—[25%: 45%: 20%]...............
-
62,500
112,500
50,000
Oct. sales ($375,000)—[25%: 45%]..........................
-
-
93,750
168,750
Nov. sales ($400,000)—[25%]...................................
-
-
-
100,000
Total............................................................................
$ 53,750
$159,250
$249,250
$338,100
Payments on credit purchases**
August
September
October
November
Aug. purchases ($125,000)—(0%: 80%: 20%)................................
$ 0
$100,000
$ 25,000
$ -
Sept. purchases ($240,000)—(0%: 80%: 20%)...............................
-
0
192,000
48,000
Oct. purchases ($225,000)—(0%: 80%)...........................................
-
-
0
180,000
Nov. purchases ($200,000)—(0%)...................................................
-
-
-
0
Total....................................................................................................
$ 0
$100,000
$217,000
$228,000
ONEIDA COMPANY
Cash Budget
For September, October, and November
September
October
November
Beginning balance...............................
$ 5,000
$ 99,250
$ 69,500
Cash receipts
Collection on accounts receivable*....
159,250
249,250
338,100
Receipts from bank loan.....................
100,000
_______
_______
Total cash available.............................
264,250
348,500
407,600
Cash disbursements
Payments on accounts payable**........
100,000
217,000
228,000
Payroll................................................
20,000
22,000
24,000
Rent....................................................
10,000
10,000
10,000
Other expenses...................................
35,000
30,000
20,000
Repayment on bank loan....................
100,000
Interest on bank loan***......................
________
________
3,000
Total cash disbursements...................
165,000
279,000
385,000
Ending cash balance............................
$ 99,250
$ 69,500
$ 22,600
Explanation / Answer
As per your requirement I am answering only in words and not considering any numerical answer.
a) Since we observe that sales trend is in upward direction and if we collect 30 % of sale in month of sale, we will have more cash in hand at end of the month. Consequently there will be fall in collection of next month to such proportion but it will be settled by additional 5% collection of that months sale . Reason for this is sales are increasing and following months will also collect 30 % of their sale value in same month which will be more then enough to cover the fall in amount that may arise on account of previous months early collection.
b) Purchases are also on upward trend and if in this situation % payment of accounts payable is increased , cash in hand will be reduced in following month. there will be more payments as purchase cost is increasing. In initial month there will be more cash flow as its obligation of amount payable is shifted to next month, but in following months this increase will lwad to lower cash in hand
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