The following information is from Tejas WindowTint’s financial records. Collecti

Question

The following information is from Tejas WindowTint’s financial records.

Collections from customers are normally 68 percent in the month of sale, 16 percent in the month following the sale, and 14 percent in the second month following the sale. The balance is expected to be uncollectible. All purchases are on account. Management takes full advantage of the 3 percent discount allowed on purchases paid for by the tenth of the following month. Purchases for August are budgeted at $61,000, and sales for August are forecasted at $67,000. Cash disbursements for expenses are expected to be $15,000 for the month of August. The company’s cash balance on August 1 was $38,000.

Required:

Prepare the expected cash collections during August.

Prepare the expected cash disbursements during August.

Calculate the expected cash balance on August 31.

Month Sales Purchases April $ 74,000 $ 60,000 May 68,000 47,000 June 62,000 35,000 July 86,000 53,000

Explanation / Answer

TEJAS WINDOW TINT Expected Cash Collections August Month Sales Percent Expected Collections August 67000 68% 45560 june 62000 14% 8680 July 86000 16% 13760 Total $68000 TEJAS WINDOW TINT Expected Cash Disbursements August July purchases to be paid in August 53000 Net 51410 Cash disbursements for expenses 15000 Total $66410 TEJAS WINDOW TINT Expected Cash Balance August 31 Balance, August 1 38000 Add:Collections 68000 Less: Disbursements 51410 Expected balance $54590

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