Sales are budgeted at $350,000 for November, $330,000 for December, and $340,000

Question

Sales are budgeted at $350,000 for November, $330,000 for December, and $340,000 for January.
Collections are expected to be 70% in the month of the sale, 26% in the month following the sale, and 4% uncollectable.
The cost of goods sold is 70% of sales.
The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of the sale. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $20,100.
Monthly depreciation is $22,000.
Ignore taxes.

Explanation / Answer

Details November December January Sales $350,000 $330,000 $340,000 Collection are expected to be 70% in the month of sale, 26% in the month following sale,and                                                                 26% in the month following sale and 4% uncollectible Schedule of Expected Cash Collections Cash collections for the month of November $245,000 91,000 Cash colections for the month of December 231,000 85,800 Collections for the month of January 238,000 88,400 Total cash collections $245,000 $322,000 $323,800 $88,400 Purchases $175,000 $175,000 165,000 165,000 170,000 170,000 Schedule of Expected Cash Disbursements Cash payments for the month of november 175,000 Cash payments for the mionth of December 165,000 Cash payments for the month of January 170,000 Expenses paid in cash $20,100 20,100 20,100 Depreciation 22,000 22,000 22,000 Total cash payments 42,100 217,100 207,100 170,000

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