Question
Part A
Orion Corporation is preparing a cash budget for the six months beginning January 1. Shown below are the company's expected collection pattern and the budgeted sales for the period: Expected collection pattern:
65% collected in the month of sale
20% collected in the month after sale
10% collected in the second month after sale
4% collected in the third month after sale
1% uncollectible
Budgeted Sales:
|
January
|
$160.000
|
|
February
|
$185.000
|
|
March
|
$190,000
|
|
April
|
$170,000
|
|
May
|
$200,000
|
|
June
|
$180,000
|
Required:
What would be the estimated total cash collections during April from sales and accounts receivables?
Part B:
Information on the actual sales and inventory purchases of the Law Company for the first quarter follow:
| inventory |
| |
Sales |
purchases |
|
January
|
$120,000
|
$60.000
|
|
February
|
$100,000
|
$78.000
|
|
March
|
$130,000
|
$90.000
|
Collections from Law Company's customers are normally 60% in the month of sale, 30% in the month following sale, and 8% in the second month following sale. The balance is uncollecuble Law Company takes full advantage of the 3% discount allowed on purchases paid for by the end of the following month.
The company expects sales in April of $150,000 and inventory purchases of $100,000. Operating expenses for the month of April are expected to be S38,000. of which 515,000 is salaries and $8,000 is depreciation The remaining operating expenses are variable with respect to the amount of sales in dollars. Those operating expenses requiring a cash outlay are paid for during the month incurred. Law Company's cash balance on March 1 was $43,000, and on April I was $35,000.
Required:
a. What would be the expected cash disbursements during April for inventory purchases?
b. What would be the expected cash disbursements during April for operating expenses?
c. What would be the expected cash balance on April 30?