Problem 4-24 Cash budget [LO2] Graham Potato Company has projected sales of $14,

Question

Problem 4-24 Cash budget [LO2]

Graham Potato Company has projected sales of $14,400 in September, $17,000 in October, $24,400 in November, and $20,400 in December. Of the company's sales, 25 percent are paid for by cash and 75 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.

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Graham Potato Company has projected sales of $14,400 in September, $17,000 in October, $24,400 in November, and $20,400 in December. Of the company's sales, 25 percent are paid for by cash and 75 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.

Explanation / Answer

Schedule of Expected Cash Collections November December Cash Sales [25%] 24400*25% 6100 20400*25% 5100 From credit sales:     September sales 14400*75%*60% 6480 0     October sales 17000*75%*40% 5100 17000*75%*60% 7650     November sales 0 24400*75%*60% 10980 Total cash collections 17680 23730 Schedule of Expected Cash Collections November December Cash balance, beginning 5000 5000 Add receipts: Collections from customers 17680 23730 Total cash available 22680 28730 Less disbursements: 20500 13000 Excess (deficiency) of receipts over disbursements 2180 15730   Financing:      Borrowings 2820      Repayments 2820   Total financing 2820 -2820   Cash balance, ending 5000 12910

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