Question

Timpco, a retailer, makes both cash and credit sales (i.e., sales on open account). Information regarding budgeted sales for the last quarter of the year is as follows: Cash sales Credit sales Total October $ 120,000 120,000 $ 240,000 November $ 99,000 118,800 $ 217,800 December $ 97,000 1 06,700 $ 203,700 Past experience shows that 5% of credit sales are uncollectible. Of the credit sales that are collectible, 60% are collected in the month of sale; the remaining 40% are collected in the month following the month of sale. Customers are granted a 1.5% discount for payment within 10 days of billing. Approximately 75% of collectible credit sales take advantage of the cash discount. Inventory purchases each month are 100% of the cost of the following month's projected sales. (The gross profit rate for Timpco is approximately 30%.) All merchandise purchases are made on credit, with 20% paid in the month of purchase and the remainder paid in the following month. No cash discounts for early payment are in effect. Required: 1. Calculate the budgeted total cash receipts for November and December. (Round your intermediate calculations and final answers to the nearest whole dollar amount.) 2. Calculate budgeted cash disbursements for November and December (budgeted total sales for January of the coming year equals $193,000). November December 1. Total cash receipts 2. Budgeted cash disbursements

Answer 1

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Timpco
Budgeted Sales	October	November	December		Note
Cash sale	120,000.00	99,000.00	97,000.00		A
Credit sale	120,000.00	118,800.00	106,700.00		B
Budgeted Sales	240,000.00	217,800.00	203,700.00		C=A+B
Budgeted Cash Receipts	October	November	December
Credit sale	120,000.00	118,800.00	106,700.00		See B
95% of Credit sale are collectible	114,000.00	112,860.00	101,365.00		D=B*95%
60% of collectible credit sale in the same month	68,400.00	67,716.00	60,819.00		E= 60% of D
40% of collectible credit sale in the next month	-	45,600.00	45,144.00		F= 40% of D of previous month
Cash sale	120,000.00	99,000.00	97,000.00		See A
Total Cash Receipts before discount	188,400.00	212,316.00	202,963.00		G=E+F+A
75% of collectible credit sale	85,500.00	84,645.00	76,023.75		H=D*75%
Cash discount of 1.5% on 75% of collectible credit sale	1,282.50	1,269.68	1,140.36		I=H*1.5%
Total Cash Receipts after discount	187,117.50	211,046.33	201,822.64		J=G-I
So budgeted total Cash Receipts	187,117.50	211,046.33	201,822.64		See J
Cost of goods sold Budget	October	November	December	January
Budgeted Sales	240,000.00	217,800.00	203,700.00	193,000.00	See C
Less: Gross profit @ 30%	72,000.00	65,340.00	61,110.00	57,900.00	K= C*30%
Cost of goods sold Budget	168,000.00	152,460.00	142,590.00	135,100.00	L=C-K
Material Purchase Budget	October	November	December	January
Cost of goods sold Budget	168,000.00	152,460.00	142,590.00	135,100.00	See L
Material to be Purchased	152,460.00	142,590.00	135,100.00		M= 100% of L of next month
Budgeted cash disbursements	October	November	December	January
Material Purchase Budget	152,460.00	142,590.00	135,100.00		See M
20% paid in the same month	30,492.00	28,518.00	27,020.00		N= M*20%
80% paid in the next month		121,968.00	114,072.00		O= 80% of M of previous month
Budgeted cash disbursements		150,486.00	141,092.00		P= N+O