Based on the following information answer QP 28-30.Martin Industries is developi
ID: 2735106 • Letter: B
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Based on the following information answer QP 28-30.Martin Industries is developing a cash 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, $450, 000, and $500, 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 sales have been collected after the 1 month. 30% of the firm's sales have been collected after 2 month. 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% o monthly sales. Taxes of $25,000 must be paid in Dec. New machinery costing $150, 000 will he 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 on 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 of 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) for the month of December has been: $441,000 233,000 416,000 None of the aboveExplanation / Answer
Martin industries Months August September October November December January Sales / Budgeted Sales $ 200,000 300,000 200,000 350,000 450,000 500,000 Cash Collection Schedule Collection of sales in August 30,000 110,000 60,000 Collection of sales in Sep 45,000 165,000 90,000 Collection of sales in Oct 30,000 110,000 60,000 Collection of sales in Nov 52,500 192,500 105,000 Collection of sales in Dec 67,500 247,500 Collection of sales in Jan 75,000 Total Collection from Sales $ 30,000 $ 155,000 $ 255,000 $ 252,500 $ 320,000 $ 427,500 28 So cash inflow from sales in Dec is =$320,000 Option c is correct. August September October November December January 29 Purchase requirements (@70% of next months sales)= 210,000 140,000 245,000 315,000 350,000 - Purchase Payment schedules August September October November December January Cash Payment in same month @20% 42,000 28,000 49,000 63,000 70,000 Credit Payment for purchase in August 126,000 42,000 Credit Payment for purchase in Sep 84,000 28,000 Credit Payment for purchase in Oct 147,000 49,000 Credit Payment for purchase in Nov 189,000 63,000 Credit Payment for purchase in Dec 210,000 Total Payments for Purchases 42,000 154,000 175,000 238,000 308,000 273,000 So payment for Purchases in Nov is $238,000 Correct option is d. 30 Total Cash Disbursement details August September October November December January Purchase Payments 42,000 154,000 175,000 238,000 308,000 273,000 rent Payment 8,000 8,000 8,000 8,000 8,000 8,000 Fixed salalry 10,000 10,000 10,000 10,000 10,000 10,000 Wages @10% of sales 20,000 30,000 20,000 35,000 45,000 50,000 Taxes 25,000 New machine payment 150,000 Interest Payment 10,000 Cash dividend 20,000 Principal payment of loan 20,000 Total disbursement 80,000 202,000 233,000 441,000 426,000 341,000 So total cash disbursement in Dec =$426,000 Correct option is d.( non of the above)
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