Delhi, Inc., seeks your assistance in developing cash and other budget informati

Question

Delhi, Inc., seeks your assistance in developing cash and other budget information for August, September, and October. At July 31, the company had cash of $12,000, accounts receivable of $864,000, inventories of $609,700, and accounts payable of $159,165. The budget is to be based on the following assumptions. • Each month’s sales are billed on the last day of the month. • Customers are allowed a 3 percent discount if payment is made within 10 days after the billing date. Receivables are recorded in the accounts at their gross amounts (not net of discounts). • The billings are collected as follows: 60 percent within the discount period, 25 percent by the end of the month, and 9 percent by the end of the following month. Six percent is uncollectible. Purchase data are as follows. • Of all purchases of merchandise and selling, general, and administrative expenses, 57 percent is paid in the month purchased and the remainder in the following month. • The number of units in each month’s ending inventory equals 130 percent of the next month’s units of sales. • The cost of each unit of inventory is $10. • Selling, general, and administrative expenses, of which $4,000 is depreciation, equal 15 percent of the current month’s sales. • Actual and projected sales follow:

Dollars Units   June $ 720,000 48,000   July 739,500 49,300   August 703,500 46,900   September 679,500 45,300   October 712,500 47,500   November 744,000 49,600

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