Based on the following information answer Qs 28-30 Martin Industries is developi

Question

Based on the following information answer Qs 28-30 Martin Industries is developing a cash budget for October, November, and December. Martin's sales in Aug and Sept were $200, 000 and $300, 000 respectively. Sales of $200, 000, $350, 000, and 5500, 000 have been forecast for Oct, Nov, Dec and Jan. respectively. Historically, the collection pattern has been as follows: 15% of the firm's sales have been collected the same month. 55% of the firm's have been collected after 1 month. 30% of the firm's sales have been collected after 2 months. Purchases: The firm's purchases represent 70% of the next month sales. Of this amount, 20% is paid in cash, 60% is paid in the month immediately following the month of purchase, and the remaining 20% is paid 2 months following the month of purchase. Rent payment is $8,000 each month. Depreciation expense is $2,000 each month. Wages and salaries: Fixed salary cost per month is $10, 000 Wages are 10% of monthly sales. New machinery costing $150, 000 will be purchased and paid in Nov. Interest payment of $10, 000 is due in Dec. Cash dividend of $20, 000 Will be paid in Oct and a $20, 000 principal payment loans is due in Dec. Cash balance at the beginning of Oct is $50, 000 and the company wants to maintain a minimum cash balance of $25,000. Total collection o f cash (cash inflows) for the month of December has been: $255,000 252,500 320, 000 770, 000 Payment for purchases for November has been: $245,000 175,000 308,000 238,000 Total disbursement of cash (cash outflows including payment for purchases) fo month of December has been: $441,000 233,000 416,000 None of the above

Explanation / Answer

Total collection of cash for the month of dec:

Payment for purchases for nov has been:

Given firm's purchases represents 70% of the next month sales therefore: Aug - 210000; Sept - 140000; Oct - 245000; Nov - 315000; DEC - 350000

Aug sept Oct Nov DEC Jan Aug 200000 30000 110000 60000 Sept 300000 - 45000 165000 90000 Oct 200000 - - 30000 110000 60000 Nov 350000 - -- - 52500 192500 105000 Dec 450000 - - - - 67500 247500 Jan 500000 - - - - - 75000 Total 320000

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