Graham Potato Company has projected sales of $13,800 in September, $16,500 in Oc
ID: 2735056 • Letter: G
Question
Graham Potato Company has projected sales of $13,800 in September, $16,500 in October, $23,800 in November, and $19,800 in December. Of the company's sales, 25 percent are paid for by cash and 75 percent are sold on credit. Experience shows that 40 percent of accounts receivable are paid in the month after the sale, while the remaining 60 percent are paid two months after. Determine collections for November and December.
Also assume Graham’s cash payments for November and December are $20,000 and $12,500, respectively. The beginning cash balance in November is $5,000, which is the desired minimum balance.
Prepare a cash budget with borrowing needed or repayments for November and December. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Assume the November beginning loan balance is $0.)
Also assume Graham’s cash payments for November and December are $20,000 and $12,500, respectively. The beginning cash balance in November is $5,000, which is the desired minimum balance.
Explanation / Answer
Graham,Company
Cash Receipts Schedule
September
October
November
December
Sales
13800
16500
23800
19800
Credit sales
10350
12375
17850
14850
Collections:
Cash sales
5950
4950
One month after sale
4950
7140
Two months after sale
6210
7425
Total cash receipts
17110
19515
Graham Potato Company
Cash Budget
November
December
Total cash receipts
17110
19515
Total cash payments
-20000
-12500
Net cash flow
-2890
7015
Beginning cash balance
5000
5000
Cumulative cash balance
2110
12015
Monthly borrowing (repayment)
2890
-2890
Ending cash balance
5000
9125
Cumulative loan balance
$
2890
0
Graham,Company
Cash Receipts Schedule
September
October
November
December
Sales
13800
16500
23800
19800
Credit sales
10350
12375
17850
14850
Collections:
Cash sales
5950
4950
One month after sale
4950
7140
Two months after sale
6210
7425
Total cash receipts
17110
19515
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