Mary and Kay, Inc., a distributor of cosmetics throughout Florida, is in the pro

Question

Mary and Kay, Inc., a distributor of cosmetics throughout Florida, is in the process of assembling a cash budget for the first quarter of 20x1. The following information has been extracted from the company’s accounting records:

All sales are on account. Sixty percent of customer accounts are collected in the month of sale; 35 percent are collected in the following month. Uncollectibles amounting to 5 percent of sales are anticipated, and management believes that only 20 percent of the accounts outstanding on December 31, 20x0, will be recovered and that the recovery will be in January 20x1.

Seventy percent of the merchandise purchases are paid for in the month of purchase; the remaining 30 percent are paid for in the month after acquisition.

The December 31, 20x0, balance sheet disclosed the following selected figures: cash, $80,000; accounts receivable, $225,000; and accounts payable, $78,000.

Mary and Kay, Inc. maintains a $80,000 minimum cash balance at all times. Financing is available (and retired) in $1,000 multiples at an 10 percent interest rate, with borrowings taking place at the beginning of the month and repayments occurring at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid at that time.

Additional data:

Required:

Prepare a schedule that discloses the firm’s total cash collections for January through March.

Prepare a schedule that discloses the firm’s total cash disbursements for January through March.

Prepare a schedule that summarizes the firm’s financing cash flows for January through March

January February March Sales revenue $ 570,000 $ 660,000 $ 675,000 Merchandise purchases 390,000 420,000 540,000 Cash operating costs 105,000 84,000 147,000 Proceeds from sale of equipment — — 27,000

Explanation / Answer

Required schedules are as prepared below:

Mary and kay Schedule of expected Cash collections For the quarter ended March 31 Month Particulars January February March Total Sales 570,000 660,000 675,000 1,905,000 Beginning Accounts Receivable 45,000 45,000 January Sales 342,000 199,500 541,500 February sales 396,000 231,000 627,000 March Sales 405,000 405,000 0 Proceeds from sale of equipment 27,000 27,000 Total collections 387,000 595,500 663,000 1,645,500 Working: Particulars January February March Total Sales 570,000 660,000 675,000 1,905,000 Beginning Accounts Receivable 225,000*20% January Sales 570,000*60% 570,000*35% February sales 660,000*60% 660,000*35% March Sales 675,000*60%

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.