Ojai Products, a distributor of organic beverages, needs a cash budget for Septe

Question

Ojai Products, a distributor of organic beverages, needs a cash budget for September. The following information is available:

   

Sales on account are collected over a three-month period as follows: 10% collected in the month of sale, 65% collected in the month following sale, and 21% collected in the second month following sale. The remaining 4% is uncollectible.

Purchases of inventory will total $24,800 for September. Thirty percent of a month's inventory purchases are paid for during the month of purchase. The accounts payable remaining from August's inventory purchases total $15,800, all of which will be paid in September.

Selling and administrative expenses are budgeted at $14,100 for September. Of this amount, $4,100 is for depreciation.

Equipment costing $18,200 will be purchased for cash during September, and dividends totaling $3,900 will be paid during the month.

The company maintains a minimum cash balance of $8,900. An open line of credit is available from the company’s bank to bolster the cash balance as needed.

   

Prepare a schedule of expected cash collections for September. (Do not round intermediate calculations.)

   

Prepare a schedule of expected cash disbursements for inventory purchases for September. (Do not round intermediate calculations.)

Prepare a cash budget for September. Indicate in the financing section any borrowing that will be needed during September. Assume that any interest will not be paid until the following month.

a. The cash balance at the beginning of September is $12,900. b. Actual sales for July and August and expected sales for September are as follows:

Explanation / Answer

Schedule for Expected Cash Collection July August Cash Sale            6,300                4,300 Collected from July Credit Sale 2110 13715 Collected from August Credit Sale 2610 Collected from September Credit Sale Total cash Collection in September month Schedule for Expected Cash Disbursement Purchase During the month of September          24,800 Payment: Cash Payment for current month purchase            7,440 Payment for August month Purchase          15,800 Total Cash Disbursement for September Month          23,240 Cash Budget Amt. Opening Balance 12900 Cash Collection During the month          34,806 Total Cash Avilable          47,706 Less: Disbursement For Inventory Purchase          23,240 Selling And administrative Expenses (14100-4100)          10,000 Equipment Purchase          18,200 Dividend Paid            3,900 Total Cash Disbursement          55,340 Net Cash           -7,634 Add: Cash From Loan          16,534 Cash Balance at end            8,900

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