Mary and Kay, Inc., a distributor of cosmetics throughout Florida, is in the pro

Question

Mary and Kay, Inc., a distributor of cosmetics throughout Florida, is in the process of assembling a cash budget for the first quarter of 20x1. The following information has been extracted from the company’s accounting records: •All sales are on account. Sixty percent of customer accounts are collected in the month of sale; 30 percent are collected in the following month. Uncollectibles amounting to 10 percent of sales are anticipated, and management believes that only 20 percent of the accounts outstanding on December 31, 20x0, will be recovered and that the recovery will be in January 20x1. •Sixty percent of the merchandise purchases are paid for in the month of purchase; the remaining 40 percent are paid for in the month after acquisition. •The December 31, 20x0, balance sheet disclosed the following selected figures: cash, $90,000; accounts receivable, $210,000; and accounts payable, $75,000. •Mary and Kay, Inc. maintains a $90,000 minimum cash balance at all times. Financing is available (and retired) in $1,000 multiples at an 10 percent interest rate, with borrowings taking place at the beginning of the month and repayments occurring at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid at that time. •Additional data:

Required:

Prepare a schedule that discloses the firm’s total cash collections for January through March.

Prepare a schedule that discloses the firm’s total cash disbursements for January through March.

Prepare a schedule that summarizes the firm’s financing cash flows for January through March

Prepare a schedule that discloses the firm’s total cash collections for January through March.

Prepare a schedule that discloses the firm’s total cash disbursements for January through March.

Prepare a schedule that summarizes the firm’s financing cash flows for January through March.

January February March Sales revenue $ 540,000 $ 630,000 $ 645,000 Merchandise purchases 360,000 390,000 510,000 Cash operating costs 102,000 81,000 144,000 Proceeds from sale of equipment — — 24,000

Explanation / Answer

January February March Collection of accounts receivable (210000*20%) 42000 Collection of January sales (540000*60%,30%) 324000 162000 Collection of February sales (630000*60%,30%)) 378000 189000 Collection of March sales 387000 Sale of equipment 24000 Total cash collections 366000 540000 600000 Cash disburments January February March Payment of accounts payable 75000 Payment of January purchases (360000*60%,40%) 216000 144000 Payment of February purchases (390000*60%,40%) 234000 156000 Payment of March purchases 306000 Cash operating costs 102000 81000 144000 Total cash disbursements 393000 459000 606000 Cash Budget January February March Beginning cash balance 90000 90000 143550 Total receipts 366000 540000 600000 Subtotal 456000 630000 743550 Less: Total disbursements 393000 459000 606000 Cash excess (deficiency) before financing 63000 171000 137550 Financing: Borrowing to maintain $90,000 balance 27000 Loan principal repaid -27000 Loan interest paid -450 Ending cash balance 90000 143550 137550 Interest (27000*10%*2/12) 450 If any doubt please comemnt. If satisfied you can rate

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