Question

The following data was obtained from the 2019 budget for Yik Yak Basecamp Supplies Co. Operating Month July Sales Purchases Expenses $112,000 $49,400 $41,600 August$125,000 $53,000 $42,250 September $150,000 $57,000 $43,000 October$%180,000 $59,600 $42,900 November $185,000 $68,600 $42,750 December $170,000 $40,400 $42,000 All sales are made on credit. Collections on customer accounts are: 5% in the month of sale; 65% one month after sale, and 30% two months after sale. All purchases are made on credit. Payments to suppliers are: 25% in the month of purchase; and 75% one month after purchase. Operating expenses in the table above include depreciation of $8,000 per month. .All cash operating expenses are paid in the month incurred. Compute the estimated amounts of the cash collections during the month of October as presented in the 2019 budget of Yik Yak Basecamp Supplies Co. (6 points) a. October Cash Collections from Customers 9000 | 180,000 x 5% | 195,000 x 65% 51,400 | 170,000 30% Month of Sale (596) 1120.250 One Month after Sale (65%) Two Months after Sale (3096) Total Cash Collections 40004 120,253+ 51,oo 180,25

Please make sure answers are correct.

Answer 1

a) Dear Student, Collection(amount collected) during the month of Oct is asked & not the bifurcation.

Accordingly correct answer is:

5% of Oct Sales 180000 = $9000

65% of Sep sales 150000 = $97500

30% of Aug Sales 125000 = $37500

Total of all of above will be collected during the month of Oct i.e. $144000.

We are in Oct, collecting 5% of current months sales + 65% Sep month's sales as they become due in Oct month + 30% of Aug sales which becomes due after 2 months i.e. in Oct

b) Same here, Total payments DURING THE MONTH should be calculated.

We are paying in the present month 75% of previous months's purchases + 25% of current months purchases.

Hence Total payments for purchases is [(59600 x 25%) + (57000 x 75%)] = $57650.

Operating expenses are allocated correctly by you i.e. $42900.

Total Cash payments hence, becomes, $57650 + $42900 = $100550

c)

Cash Balance, beginning	20725
Cash Collections	144000
Available for Disbursement	164725
Cash payments	(100550)
Cash before short time Financing	64175