7. Josh Company in the home remodeling industry. In Year 2, it is expected that
ID: 2446431 • Letter: 7
Question
7. Josh Company in the home remodeling industry. In Year 2, it is expected that 40 percent of a month?s sales will be collected in cash, with the balance being collected the following month. Of the purchases, 50 percent are paid the following month, 30 percent are paid in two months, and the remaining 20 percent are paid during the month of purchase. The sales force receives $2,000 a month base pay plus a 2 percent commission. Labor expenses are expected to be $4,000 a month. Other operating expenses are expected to run about $2,000 a month, including $500 for depreciation. The ending cash balance for Year I was $4,500.Explanation / Answer
Statement showing Cash Budget Particulars November December January February March Sales 80,000.00 90,000.00 70,000.00 90,000.00 30,000.00 Cash Sales @40% (a) 32,000.00 36,000.00 28,000.00 36,000.00 12,000.00 Credit Sales = Sale-cash sales 48,000.00 54,000.00 42,000.00 54,000.00 18,000.00 Collection in next month (b) 54,000.00 42,000.00 54,000.00 Purchases 70,000.00 80,000.00 70,000.00 60,000.00 50,000.00 Pmt in next mnth @50% (d) 35,000.00 40,000.00 35,000.00 30,000.00 Pmt in next to next mnth @30% (e) 21,000.00 24,000.00 21,000.00 Pymnt in Same month@20% (f) 14,000.00 16,000.00 14,000.00 12,000.00 10,000.00 Fixed Sales comm (g) 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 Variable sales comm @2% of sales (h) 1,600.00 1,800.00 1,400.00 1,800.00 600.00 Labour expenses (i) 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 Other op exp excl dep (j) (2000-500) 1,500.00 1,500.00 1,500.00 1,500.00 1,500.00 Net Collections or Pymnts (a + b -d-e-f-g-h-i-j) (1,900.00) (2,300.00) (3,100.00) Opening Cash Balance 4,500.00 2,600.00 300.00 Ending Cash Balance 2,600.00 300.00 (2,800.00) Borrowed 2,800.00 Company would borrow in March
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