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 $11,000, accounts receivable of $870,000, inventories of $631,800, and accounts payable of $153,889. 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, 52 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 $5,000 is depreciation, equal 10 percent of the current month’s sales.

Actual and projected sales follow:

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 $11,000, accounts receivable of $870,000, inventories of $631,800, and accounts payable of $153,889. The budget is to be based on the following assumptions.

Explanation / Answer

a)

Budgeted purchases in dollars for August.is 449,600

b)

Budgeted purchases in dollars for September is $ 489,200

c)

Budgeted cash collections during August is $ 673,047 computed as shown below:

d)

Budgeted cash disbursements during September is $ 535,908 computed as under:

e)

Budgeted number of units of inventory to be purchased during October is 49,500 shown as below:

Delhi Inc Sales Budget For the quarter ended October Month Particulars August September October Quarter Sales   7,29,000 6,87,000 7,23,000 21,39,000 Total Sales $7,29,000 $6,87,000 $7,23,000 $21,39,000

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