Exercise 184 Burr, Inc. provided the following information: • Burr estimates tha

Question

Exercise 184

Burr, Inc. provided the following information:

• Burr estimates that it will collect 40% of its sales in the month of sale, 35% in the month after the sale, and 22% in the second month following the sale. Three percent of all sales are estimated to be bad debts.

• Burr pays 30% of merchandise purchases in the month purchased and 70% in the following month.

• General operating expenses are budgeted to be $20,000 per month of which depreciation is $2,000 of this amount. Burr pays operating expenses in the month incurred.

• Burr makes loan payments of $3,000 per month of which $400 is interest and the remainder is principal.

Calculate Burr's budgeted cash disbursements for August.

July August Projected sales $220,000 $260,000 Projected merchandise purchases $150,000 $180,000

Explanation / Answer

Payment pattern for merchandise purchases = 30% in the month of purchase, 70% in the following month

Payment for merchandise purchases for August = (180,000 * 30%) + (150,000 * 70%)

= 54,000 + 105,000

= 159,000

Operating expenses = 20,000

Cash Disbursements for operating expenses = 20,000 - 2,000 = 18,000

Cash Disbursements for loan payment = 3,000

Cash Disbursements for August = Payment for merchandise purchases for August + Cash Disbursements for operating expenses for August + Cash Disbursements for loan payment for August

= 159,000 + 18,000 + 3,000

= 180,000.

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

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