LO 10-4] 10-31 Cash Receipts and Payments Information pertaining to Noskey Corpo
ID: 2513242 • Letter: L
Question
LO 10-4] 10-31 Cash Receipts and Payments Information pertaining to Noskey Corporation's sales revenue follows Cash sales Credit sales Total sales November 2015 (Actual) 80,000 240,000 $320,000 December 2015 (Budgeted) $100,000 360,000 $460,000 January 2016 (Budgeted) S 60,000 180,000 $240,000 Management estimates 5% of credit sales to be uncollectible. Of collectible credit sales, 60% is collected in the month of sale and the remainder in the month following the month of sale. Purchases of inventory each month include 70% of the next month's projected total sales (stated at cost) plus 30% of projected sales for the current month (stated at cost). All inventory purchases are on account, 25% is paid in the month of purchase, and the remainder is paid in the month following the month of purchase. Purchase costs are approximately 60% of the selling price Required Determine for Noskey: 1. Budgeted cash collections in December 2015 from November 2015 credit sales. 2. Budgeted total cash receipts in January 2016. 3. Budgeted total cash payments in December 2015 for inventory purchases (CPA Adapted)Explanation / Answer
Answer-
1) Cash Collection in the month of december from november 2015
Total credit sale in the november=$240000
60% is collected in november=$240000*60/100=$144000
5% Credit sale is uncollectable=$240000*5/100=$12000
Remaining 35% will collect in december =$240000*35/100=$84000
2)Total cash receipts in the month of january
a)Cash sales in January=$60000
Credit sale in january=$180000
B) 60% is to be received in january=180000*60/100=$108000
c) 35% of credit sale in the month of december is to be received in january=$360000*35/100=$126000
Total cash receipts in january =a+b+c
= 60000+108000+126000
=$234000
3) Total cash payment in December for inventory purchase=(70%of total projected sale of january+30% of projected total sales of december)*60%
=(70% of $240000+30% of 460000)*60%
Budgeted total cash payment in december 2015 for inventory purchase=$183600
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