The following information pertains to the operating budget for Clippers Corporat
ID: 2453202 • Letter: T
Question
The following information pertains to the operating budget for Clippers Corporation.
Sales for August were $175,000
Sales for September were $185,000
Budgeted sales for October is $182,000 and for November is $226,000.
Cash sales are 10% of total sales
Collections for sales on account are 50% in the month of sale, 40% the next month, 8% in the third month.
Gross margin is 40% of sales.
Purchases are paid 30% in the month of purchase and 70% in the next month. Merchandise is bought and sold in the same month. There is no beginning or ending inventory.
Operating, general & administrative costs are $62,000 each month, $4,000 of which is depreciation expense.
A down payment on new equipment for January delivery is due on October 5th in the amount of $14,000.
Opa Locka policy is to end each month with $20,000 cash on hand.
Beginning cash balance on October 1 is $20,000.
The outstanding loan balance on October 1 is $30,000.
What are . . .
Collections from sales for October _____________ November _____________
Disbursements for purchases October _____________ November _____________
Cash balance at the end of (before borrowing/repaying) October _____________ November _____________
Loan balance at the end of October _____________ November _____________
Operating income for October _____________ November _____________
Cash flow for October _____________ November _____________
Uncollected balance from sales at the end of November _____________
Unpaid balance from purchases at the end of November _____________
Explanation / Answer
Details August September October November Sales revenue 175,000 185,000 182,000 226,000 Collection schedule Total Cash Sales 18,200 22,600 40,800 Credit sale collections - Collections for August 12,600 12,600 Collections for Sept 66,600 13,320 79,920 Collections for Oct 81,900 65,520 147,420 Collections for Nov 101,700 101,700 Total Collections 179,300 203,140 382,440 Bad debts@1.8% of sales 3,276 4,068 Cost of Merchandise sold 111,000 109,200 135,600 244,800 Payment for Merchandise September October November Tptal Purchase for Sep 77,700 77,700 Purchase for Oct 32,760 76,440 109,200 Purchase for Nov 40,680 40,680 Total Merchandise payment 110,460 117,120 227,580 Gen & Admin cash payments 58,000 58,000 116,000 Cash Budget October November Total Opening Balance 20,000 20,840 20,860 Total Collections 179,300 203,140 382440 Total Merchandise payment 110,460 117,120 227,580 Gen & Admin cash payments 58,000 58,000 116,000 Machinery Payment 14,000 Total Payments 182,460 175,120 343,580 Cash balance before borrowing 16,840 48,860 Bank Loan 4,000 (28,000) (24,000) Closing Balance 20,840 20,860 Income statement October November Total Sales revenue 182,000 226,000 408,000 Cost Of Merchandise 109,200 135,600 244,800 Gen & Admin Exp(with depr) 62,000 62,000 124,000 Expense for Bad debts 3,276 4,068 7,344 Net Opearting Income 7,524 24,332 31,856 ( no interest calculated as no rate details given) October November Total Total Collections from sales 179,300 203,140 382440 Disbursement for Purchase 182,460 175,120 343580 Cas balance before boorowing 16,840 48,860 Loan Balance at the end 34,000 6,000 opearting Income 7,524 24,332 Cash Flow for 840 20 Uncollected balance from sales 94,464 Unpaid balance from purchase 94,920
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