PROBLEM Schedules of Expected Cash Collections and Disbursements
Calgon Products, a distributor of organic beverages, needs a cash budget for September. The following information is available:
a. The cash balance at the beginning of September is $9,000.
b. Actual sales for July and August and expected sales for September are as shown below. Sales on account are collected over a three-month period as follows: 10% collected in the month of sale, 70% collected in the month following sale, and 18% collected in the second month following sale. The remaining 2% is uncollectable.
|
|
July
|
August
|
September
|
|
Cash sales.......................
|
S 6,500
|
S 5,250
|
S 7,400
|
|
Sales on account..............
|
20,000
|
30,000
|
40,000
|
|
Total sales........................
|
$26,500
|
$35,250
|
$47,400
|
|
|
|
|
1111=11i
|
c. Purchases of inventory will total $25,000 for September. Twenty percent of a month's inventory purchases are paid for during the month of purchase. The accounts payable remaining from August's inventory purchases total $16,000, all of which will be paid in September.
d. Selling and administrative expenses are budgeted at $13.000 for September. Of this amount, $4,000 is for depreciation.
e. Equipment costing $18,000 will be purchased for cash during September, and dividends totalling $3,000 will be paid during the month.
f. The company maintains a minimum cash balance of $5,000. An open line of credit is available from the company's bank to bolster the cash position as needed.
Required:
1. Prepare a schedule of expected cash collections for September.
2. Prepare a schedule of expected cash disbursements during September for inventory purchases.
3. Prepare a cash budget for September. Indicate in the financing section any borrowing that will be needed during September.