Sales on account are collected over a three-month period as follows: 5% collecte

Question

Sales on account are collected over a three-month period as follows: 5% collected in the month of sale, 60% collected in the month following sale, and 33% collected in the second month following sale. The remaining 2% is uncollectible.

Purchases of inventory will total $30,000 for September. Thirty 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 $16,000, all of which will be paid in September.

The company maintains a minimum cash balance of $7,800. An open line of credit is available from the company's bank to bolster the cash balance as needed.

Prepare a schedule of expected cash disbursements for inventory purchases for September. (Do not round intermediate calculations. Omit the "$" sign in your response.)

Prepare a cash budget for September. Indicate in the financing section any borrowing that will be needed during September. Assume that any interest will not be paid until the following month. (Input all amounts as positive values except cash deficiency, repayments and interest which should be indicated by a minus sign. Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Calgon Products, a distributor of organic beverages, needs a cash budget for September. The following information is available:

Explanation / Answer

The cash balance at the beginning of September $ 9,000 b. Actual sales for July and August and expected sales for September are as follows: &nbs p; Cash sales ......... July $6,500 August $5,250 September $7,400 Sales on account ... July $20,000 August $30,000 September $40,000 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. c. Purchases of inventory will total $25,000 for September. Twenty percent of a month's inventory purchases are paid for during the month of purchase. The accounts payable remaining for August's inventory purchases total $16,000, all of which will be paid in September. d. Selling and administrative expenses are budgeted at $13,000 for September. Of this amount, $4,000 is for depreciation. e. Equipment costing $18,000 will be purchased for cash during September, and dividends totaling $3,000 will be paid during the month. f. The company maintains a minimum cash balance of $5,000. An open line of credit is available from the company's bank to bolster the cash position as needed. Required: 1. Prepare a schedule of expected cash collections for September. 2. Prepare a schedule of expected cash disbursements for merchandise inventory purchases in September. 3. Prepare a cash budget for September. Indicate in the financing section any borrowing that will be needed during September 1. September cash sales......................................................................... $?7,400 September collections on account: July sales: $20,000 × 18%............................................................. 3,600 August sales: $30,000 × 70%........................................................ 21,000 September sales: $40,000 × 10%.................................................. 4,000 Total cash collections......................................................................... $36,000 2. Payments to suppliers: August purchases (accounts payable).......................................... $16,000 September purchases: $25,000 × 20%......................................... 5,000 Total cash payments.......................................................................... $21,000 3. Calgon Products Cash Budget For the Month of September Cash balance, September 1........................................................ $?9,000 Add cash receipts: Collections from customers..................................................... 36,000 Total cash available before current financing.......................... 45,000 Less disbursements: Payments to suppliers for inventory...................................... $21,000 Selling and administrative expenses....................................... 9,000 * Equipment purchases.............................................................. 18,000 Dividends paid......................................................................... 3,000 Total disbursements.................................................................... 51,000 Excess (deficiency) of cash available over disbursements........ (6,000) Financing: Borrowings............................................................................... 11,000 Repayments.............................................................................. 0 Interest...................................................................................... 0 Total financing............................................................................. 11,000 Cash balance, September 30...................................................... $?5,000 ?*$13,000 – $4,000 = $9,000.

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