Question

The following information is available for the Barkery, a gourmet pet food and toys store: 1. Balance sheet information as of September 30, 2019: $ 21,000 31,360 20,000 119,075 Current Assets Cash Accounts Receivable Inventory Equipment (net) Current Liabilities Accounts Payable Interest Payable Notes Payable Common stock Retained earnings 7,200 3,188 85,000 35,000 61,047 2. Recent and anticipated sales: August September October November December $50,000 $40,000 $70,000 $90,000 $110,000 3. Credit sales: Sales are 80% for credit and 20% cash. Assume that the credit accounts are collected 10% within the month of sale, 80% within the month following the sale, 8% within the second month following the sale and 2% is uncollectible and written off immediately as a bad debt. 4. Cost of goods sold is 45% of sales. We pay for 60% of the purchases in the month of purchase and the remaining 40% of the purchases in the month following the purchase. 5. Inventory is equal to $20,000 at all times. 6. Operating costs: Salaries and wages average 23% of monthly revenues, other monthly operating costs are $4,500. Assume that these costs are paid out each month. Depreciation is $750 per month. 7. The note payable is due on June 30, 2021. Accrue monthly interest at 5% per annum that will be paid with the note payable balance on June 30, 2021. 8. Assume that a minimum cash balance of $15,000 must be maintained. Assume also that all borrowing is effective at the beginning of the month and all repayments are made

Answer 1

		Barkery
		Schedule of Expected Cash Collection
		October	November	December	Quarter
a)	Cash Sales	$                                       14,000.00	$                                       18,000.00	$                                     22,000.00	$                       54,000.00
	Credit Sales	$                                       34,400.00	$                                       54,560.00	$                                     70,880.00	$                    1,59,840.00
	Cash collection	$                                       48,400.00	$                                       72,560.00	$                                     92,880.00	$                    2,13,840.00
		October	November	December
	Cash Sales	($70000*20%)	($90000*20%)	($110000*20%)
	Credit Sales	($70000*80%)	($90000*80%)	($110000*80%)
		Cash collection
		October	November	December
	Cash Sales	($70000*20%)	($90000*20%)	($110000*20%)
	Credit Sales	($50000*80%*8%+$40000*80%*80%+$70000*80%*10%)	($40000*80%*80%+$70000*80%*80%+$90000*80%*8%)	($70000*80%*8%+$90000*80%*80%+$110000*80%*10%)
		Barkery
b)		Merchandise Purchase Budget
		October	November	December	Quarter
	Budgeted Cost of goods sold	$                                       31,500.00	$                                       40,500.00	$                                     49,500.00	$                    1,21,500.00
	Add: Desired Ended Inventory	$                                       20,000.00	$                                       20,000.00	$                                     20,000.00	$                       60,000.00
	Total Needs	$                                       51,500.00	$                                       60,500.00	$                                     69,500.00	$                    1,81,500.00
	Less: Beginning Inventory	$                                       20,000.00	$                                       20,000.00	$                                     20,000.00	$                       60,000.00
	Required Purchases	$                                       31,500.00	$                                       40,500.00	$                                     49,500.00	$                    1,21,500.00
		Cost of goods sold
	October	($70000*45%)	31500
	November	($9000*45%)	40500
	December	($110000*45%)	49500
		Barkery
		Schedule of Expected Cash Disbursement
		October	November	December	Quarter
	Accounts Payable	$                                         7,200.00			$                          7,200.00
	October Purchase	$                                       18,900.00	$                                       12,600.00		$                       31,500.00
	November Purchase		$                                       24,300.00	$                                     16,200.00	$                       40,500.00
	December Purchase			$                                     29,700.00	$                       29,700.00
		$                                       26,100.00	$                                       36,900.00	$                                     45,900.00	$                    1,08,900.00
		Cash Disbursement
		October	November	December
	October Purchase	($31500*60%)	($31500*40%)
	November Purchase		($40500*60%)	($40500*40%)
	December Purchase			($49500*60%)
c )		Barkery
		Schedule of Expected Cash Disbursement
		October	November	December	Quarter
	Amount paid to Supplier	$                                       26,100.00	$                                       36,900.00	$                                     45,900.00	$                    1,08,900.00
	Salaries and Wages(Sales*12%)	$                                       16,100.00	$                                       20,700.00	$                                     25,300.00	$                       62,100.00
	Other Operating Expenses	$                                         4,500.00	$                                          4,500.00	$                                       4,500.00	$                       13,500.00
	Total disbursement	$                                       46,700.00	$                                       62,100.00	$                                     75,700.00	$                    1,84,500.00
		Barkery
d)		Cash Budget
		October	November	December	Quarter
	Cash Balance	$                                       21,000.00	$                                       22,700.00	$                                     33,160.00	$                       21,000.00
	Cash Collection	$                                       48,400.00	$                                       72,560.00	$                                     92,880.00	$                    2,13,840.00
	Total Cash available=(A)	$                                       69,400.00	$                                       95,260.00	$                                 1,26,040.00	$                    2,34,840.00
	Less: Cash Disbursement
	Cash payment to supplier	$                                       26,100.00	$                                       36,900.00	$                                     45,900.00	$                    1,08,900.00
	Salaries and Wages	$                                       16,100.00	$                                       20,700.00	$                                     25,300.00	$                       62,100.00
	Other Operating Expenses	$                                         4,500.00	$                                          4,500.00	$                                       4,500.00	$                       13,500.00
	Total Cash disbursement=(B)	$                                       46,700.00	$                                       62,100.00	$                                     75,700.00	$                    1,84,500.00
	Excess of Deficiency of cash=(C )=(A)-(B)	$                                       22,700.00	$                                       33,160.00	$                                     50,340.00	$                       50,340.00
	Balance=(C )	$                                       22,700.00	$                                       33,160.00	$                                     50,340.00	$                       50,340.00