2-b. Schedule of expected cash disbursements for merchandise purchases Schedule

Question

2-b. Schedule of expected cash disbursements for merchandise purchases Schedule of Expected Cash Disbursements for Merchandise Purchases February March Quarter January $ 88,425 December purchases January purchases February purchases March purchases Total cash disbursements for purchases 133,575 133,575 3. Cash budget. (Cash deficiency, repayments and interest should be indicated by a minus sign.) Hillyard Company Cash Budget January February March Quarter Beginning cash balance Add cash collections Total cash available Less cash disbursements 51,000 288,000 339,000 222,000 123,680 Purchases of inventory Selling and administrative expenses Purchases of equipment Cash dividends 45,000 390,680 (51,680) Total cash disbursements Excess (deficiency) of cash Financing Borrowings Repayments Interest Total financing Ending cash balance

Explanation / Answer

Solution:

1) Schedule of Expected Cash Collections

Schedule of Expected Cash Collections

January

February

March

Quarter

Cash Sales (20% of total sales)

$79,200

(396,000*20%)

$118,600

(593000*20%)

$61,400

(307000*20%)

Credit Sales

$208,800

(Dec 261000*80%)

$316,800

(Jan 396,000*80%)

$474,400

(Feb 593000*80%)

Total Collections

$288,000

$435,400

$535,800

$1,259,200

2-a) Merchandise Purchase Budget

Merchandise Purchase Budget

January

February

March

Quarter

Budgeted cost of goods sold

$237,600

(396000*60%)

$355,800

(593000*60%)

$184,200

(307000*60%)

Add desired ending inventory (25% of next month’s COGS)

$88,950

(355800*25%)

$46,050

(184200*25%)

$30,600

(April COGS 204000*60%*25%)

Total needs

$326,550

$401,850

$214,800

Less beginning inventory (ending inventory of last month)

$59,400

$88,950

$46,050

Required purchases

$267,150

$312,900

$168,750

$748,800

2-b) Schedule of expected cash disbursements for merchandise purchases

Schedule of expected cash disbursements for merchandise purchases

January

February

March

Quarter

December purchases

$88,425

January purchases

$133,575

(Jan 267150/2)

$133,575

(Jan 267150/2)

February purchases

$156,450

(Feb 312,900/2)

$156,450

(Feb 312900/2)

March purchases

$84,375

(March 168,750/2)

Total Cash disbursements for purchases

$222,000

$290,025

$240,825

$752,850

3) Cash Budget

Hillyard Company

Cash Budget

January

February

March

Quarter

Beginning Cash Balance

$51,000

$30,320

$30,075

$51,000

Add:   Collection from Customers

$288,000

$435,400

$535,800

$1,259,200

Total Available Cash

$339,000

$465,720

$565,875

$1,310,200

Less: Cash Disbursements

Purchase of Inventory

$222,000

$290,025

$240,825

$752,850

Selling and Administrative expenses (Note 1)

$123,680

$139,440

$116,560

$379,680

Purchase of equipment

$0

$2,100

$75,500

$77,600

Cash dividends

$45,000

$0

$0

$45,000

Total Cash Disbursements

$390,680

$431,565

$432,885

$1,255,130

Excess (deficiency) of cash

-$51,680

$34,155

$132,990

$55,070

Financing:

Borrowings

$82,000

$82,000

  Repayments

-$4,000

-$78,000

-$82,000

Interest

-$80

-$2,340

-$2,420

Total Financing

$82,000

-$4,080

-$80,340

-$2,420

Ending Cash Balance

$30,320

$30,075

$52,650

$52,650

Interest Calculation of Repayment of Borrowing

Repayment of Borrowing in February = $4,000*1%*2 months = $80

Repayment of Borrowing in march = $78,000*1%*3 months = $80

Note 1 –

Calculation of cash payment for Selling and administrative expense

January

February

March

Sales

396000

593000

307000

Selling and administrative expense:

Salaries and wages

$26,000

$26,000

$26,000

Advertising

$66,000

$66,000

$66,000

Shipping (5% of sales)

$19,800

$29,650

$15,350

Other expense (3% of sales)

$11,880

$17,790

$9,210

Total Selling and administrative expenses

$123,680

$139,440

$116,560

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question. Please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Schedule of Expected Cash Collections

January

February

March

Quarter

Cash Sales (20% of total sales)

$79,200

(396,000*20%)

$118,600

(593000*20%)

$61,400

(307000*20%)

Credit Sales

$208,800

(Dec 261000*80%)

$316,800

(Jan 396,000*80%)

$474,400

(Feb 593000*80%)

Total Collections

$288,000

$435,400

$535,800

$1,259,200

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