The following information pertains to Amigo Corporation: Sales Purchases Month J

Question

The following information pertains to Amigo Corporation: Sales Purchases Month July August September October November December $10,000 12,000 14,000 16,000 18,000 20,000 $30,000 34,000 38,000 42,000 48,000 60,000 . Cash is collected from customers in the following manner Month of sale (2% cash discount) Month following sale Two months following sale Amount uncollectible 40% of purchases are paid for in cash in the month of purchase, and the balance is pai 30% 50% 15% 5% following month. Required: Complete the cash budget for the 4th quarter October November December Beginning Balance: $10,000 Cash Collections from: August September Octob

Explanation / Answer

Collection in the month of sale:-

October = 30%×42,000 - 2%×30%×42,000 = 12,600-252 = $12,348

November = 30%×48,000 - 2%×30%×48,000 = 14,400-288 = $14,112

December = 30%×60,000 - 2%×30%×60,000 = 18,000-360 = $17,640

Ending Cash Balance = Beginning Balance + Total Cash Collections - Total Cash Payments

Change in cash = Ending Balance - Beginning Balance

Cash Budget October November December Beginning balance: $10,000 $31,648 $55,660 Cash Collections from: August 5,100 September 19,000 5,700 October 12,348 21,000 6,300 November 14,112 24,000 December 17,640 Total Cash Collections $36,448 $40,812 $47,940 Cash Payments from: September 8,400 October 6,400 9,600 November 7,200 10,800 December 8,000 Total Cash Payments $14,800 $16,800 $18,800 Change in Cash $21,648 $24,012 $29,140 Ending Cash Balance $31,648 $55,660 $84,800

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