Graham potato company has projected sales of $6,000 in september, $10,000 in oct
ID: 2501679 • Letter: G
Question
Graham potato company has projected sales of $6,000 in september, $10,000 in october, $16,000 in november, and $12,000 in december. Of the company's sales, 20 percent are paid for by cash and 80 percent are sold on credit. Experience shows that 40 percent of accounts receivable are paid in the month after the sale, while the remaining 60 percent are paid two months after, Determine collections for november and december. also assume Graham's cash payments for November and December are $13,000 and $6,000, respectively. The beginning cash balance in november is $5,000, which is the desired minimum balance. prepare a cash budget with borrowing needed or repayments for november and december (you will need to prepare a cash receipts schedule first)
Explanation / Answer
Answer:
Graham Potato Company
Cash Receipts Schedule
September
October
November
December
Sales
$6,000
$10,000
$16,000
$12,000
Credit sales (80%)
4,800
8,000
12,800
9,600
Cash sales (20%)
1,200
2,000
3,200
2,400
Collections in month after sales (40%)
3,200
5,120
Collections two months after sales (60%)
2,880
4,800
Total cash receipts
$9,280
$12,320
Graham Potato Company (Continued)
Cash Budget
November
December
Cash receipts
$ 9,280
$12,320
Cash payments
13,000
6,000
Net Cash Flow
(3,720)
6,320
Beginning Cash Balance
5,000
5,000
Cumulative Cash Balance
1,280
11,320
Monthly Loan or (Repayment)
3,720
(3,720)
Cumulative Loan Balance
3,720
-0-
Ending Cash Balance
$ 5,000
$ 7,600
September
October
November
December
Sales
$6,000
$10,000
$16,000
$12,000
Credit sales (80%)
4,800
8,000
12,800
9,600
Cash sales (20%)
1,200
2,000
3,200
2,400
Collections in month after sales (40%)
3,200
5,120
Collections two months after sales (60%)
2,880
4,800
Total cash receipts
$9,280
$12,320
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