The following information pertains to Amigo Corporation: Month Sales Purchases J
ID: 2564889 • Letter: T
Question
The following information pertains to Amigo Corporation:
Month Sales Purchases
July $30,000 $10,000
August 34,000 12,000
September 38,000 14,000
October 42,000 16,000
November 48,000 18,000
December 60,000 20,000
Cash is collected from customers in the following manner:
Month of sale (2% cash discount) 30%
Month following sale 50%
Two months following sale 15%
Amount uncollectible 5%
40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.
Required: Complete the cash budget for the 4th quarter
October November December
Beginning Balance: $10,000
Cash Collections from:
August
September
October
November
December
Total Cash Collections A) B) C)
Cash Payments from:
September
October
November
December
Total Cash Payments D) E) F)
Change in Cash G) H) I)
Ending Cash Balance J) K) L)
Explanation / Answer
Amigo Corporation
Cash Budget
Amigo Corporation
Cash Budget for the 4th Quarter:
October
November
December
Beginning Balance
$10,000
$31,648
$55,660
Cash Collections from:
August
$5,100
September
$19,000
$5,700
October
$12,348
$21,000
$6,300
November
$14,112
$24,000
December
$17,640
Total Cash Collections
$36,448
$40,812
$47,940
Cash Disbursements:
Cash Payments from:
September
$8,400
October
$6,400
$9,600
November
$7,200
10,800
December
$8,000
Total Cash Payments
$14,800
$16,800
$18,800
Change in Cash
$21,648
$24,012
$29,140
Ending Cash Balance
$31,648
$55,660
$84,800
Notes:
Cash collection in the same month is subject to a cash discount, hence cash collected in,
October = 30% of sales – 2% cash discount = $42,000 x 30% - 42,000 x 30% x 2% = $12,600 - $252 = $12,348
November = 48,000 x 30% - 48,000 x 30% x 2% = 14,400 – 288 = $14,112
December = 60,000 x 30% - 60,000x 30% x 2% = 18,000 – 360 = $17,640
September collections in October = 50% of 38,000 = $19,000
October collections in November = 50% of 42,000 = $21,000
November collections in Dec = 50% of 48,000 = $24,000
August collections in October = 15% of 34,000 = $5,100
September collections in Nov = 15% of 38,000 = $5,700
October collections in Dec = 15% of 42,000 = $6,300
October purchases in October = 16,000 x 40% = $6,400
60% of November purchases are paid in December = 18,000 x 60% = 10,800
Amigo Corporation
Cash Budget for the 4th Quarter:
October
November
December
Beginning Balance
$10,000
$31,648
$55,660
Cash Collections from:
August
$5,100
September
$19,000
$5,700
October
$12,348
$21,000
$6,300
November
$14,112
$24,000
December
$17,640
Total Cash Collections
$36,448
$40,812
$47,940
Cash Disbursements:
Cash Payments from:
September
$8,400
October
$6,400
$9,600
November
$7,200
10,800
December
$8,000
Total Cash Payments
$14,800
$16,800
$18,800
Change in Cash
$21,648
$24,012
$29,140
Ending Cash Balance
$31,648
$55,660
$84,800
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