Problem - NanoTech is developing cash and other budget information for May, June and July. On April 30, the company had cash of $10,000 accounts receivable of $75,000, and accounts payable of $100,000. The budget is to be based on the following assumptions.
- Each month's sales are billed on the last day of the month.
- The billing is collected as follows: 70% within the discount period, 15% by the end of the month, 10 % by the end of second month. The rest is uncollectable.
- Customer are allowed 2% discount if payment is made within 10 days after billing date. Receivables are recorded in the accounts at their gross amounts. (not net of discounts)
- The cost of each unit of inventory is $3.
- Of all purchases of merchandise and selling, general, and administrative expenses 60% is paid in the month purchased and the remainder in the following month.
- The number of units in each months ending inventory equals 110% of next month's units sales.
- Selling, general, and administrative expenses, of which $5,000 is depreciation, equal 20% of current month's sales. Actual sales for March and April and projected sales for May through August are as follows:
Dollars Units
March $100,000 10,000
April $110,000 11,000
May $120,000 12,000
June $130,000 13,000
July $140,000 14,000
August $150,000 15,000
Using the preceding information, compute the following amounts:
a) Budgeted purchases in dollars for May
b) Budgeted Cash Collections for May
c) Budgeted Cash Disbursements for June