Calgon Products, a distributor of organic beverages, needs a cash budget for Sep

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 $9,300 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 sale, 70% collected in the month following sale, and 18% collected in the second month following sale. The remaining 2% is uncollectible. July August September 7,100 5,550 7,640 Cash sales Sales on account 23,000 36,000 46,000 Total sales $30,100 $41,550 $53,640 c. Purchases of inventory will total $28,000 for September. Twenty percent of a month's inventory purchases are paid for during the month of purchase. The accounts payable remaining from August's inventory purchases total $19,600, all of which will be paid in September. d. Selling and administrative expenses are budgeted at $16,000 for September. Of this amount, $5,200 is e. Equipment costing $21,000 will be purchased for cash during September, and dividends totalling $3,880 f. The company maintains a minimum cash balance of $5,600. An open line of credit is available from the for depreciation. will be paid during the month company's bank to bolster the cash position as needed. Assume any borrowings occur at the beginning of the month and repayments occur at the end of the month. Interest on outstanding loan balances during the month must be paid at the end of each month. The monthly interest rate is 0.5%.

Explanation / Answer

SOLUTION

1. Schedule of expected cash collections

2. Schedule of expected cash disbursements

3. Cash Budget

Amount ($) September Cash Sales 7,640 September collections on account- July Sales ($23,000 *18%) 4,140 August Sales ($36,000 * 70%) 25,200 September Sales ($46,000 * 10%) 4,600 Total cash collections 41,580

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