Sales on account are collected over a three-month period as follows: 20% collect
ID: 2464184 • Letter: S
Question
Sales on account are collected over a three-month period as follows: 20% collected in the month of sale, 60% collected in the month following sale, and 18% collected in the second month following sale. The remaining 2% is uncollectible.
Purchases of inventory will total $372,000 for December. Thirty percent of a month’s inventory purchases are paid during the month of purchase. The accounts payable remaining from November’s inventory purchases total $189,500, all of which will be paid in December.
Prepare a schedule of expected cash disbursements for merchandise purchases for December.
Prepare a cash budget for December. Indicate in the financing section any borrowing that will be needed during the month. Assume that any interest will not be paid until the following month.
Explanation / Answer
October
November
December
Cash sales (1)
83000
79000
85600
Credit sales
500000
624000
674000
Collection from credit sales (october)
100000
300000
90000
Collection from credit sales (November)
124800
374400
Collection from credit sales (December)
134800
Collection from credit sales (2)
100000
424800
599200
Purchase of inventory
372000
Payment for purchase (30% in same month)
111600
Accounts payable of November
189500
Total payment (3)
301100
Selling and admin exp (502000-69000) (4)
433000
New web server (5)
88500
Divident (6)
14500
Opening cash balance (7)
47000
Net cash balance (1+2-3-4-5-6+7)
-105300
Minimum clsoing balace
20000
Withdrwal from credit line
125300
October
November
December
Cash sales (1)
83000
79000
85600
Credit sales
500000
624000
674000
Collection from credit sales (october)
100000
300000
90000
Collection from credit sales (November)
124800
374400
Collection from credit sales (December)
134800
Collection from credit sales (2)
100000
424800
599200
Purchase of inventory
372000
Payment for purchase (30% in same month)
111600
Accounts payable of November
189500
Total payment (3)
301100
Selling and admin exp (502000-69000) (4)
433000
New web server (5)
88500
Divident (6)
14500
Opening cash balance (7)
47000
Net cash balance (1+2-3-4-5-6+7)
-105300
Minimum clsoing balace
20000
Withdrwal from credit line
125300
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