Question

Mary and Kay, Inc, a distributor of cosmetics throughout Florida, is in the process of assembling a cash budget for the first quarter of 20x1. The following information has been extracted from the company's accounting records: All sales are on account. Sixty percent of customer accounts are collected in the month of sale: 35 percent are collected in the following month. Uncollectibles amounting to 5 percent of sales are anticipated, and management believes that only 20 percent of the accounts outstanding on December 31, 20xO, will be recovered and that the recovery will be in January 20x1. Sixty percent of the merchandise purchases are paid for in the month of purchase; the remaining 40 percent are paid for in the month after acquisition. . The D 31, 20x0, balance sheet disclosed the following selected figures: cash, $85,000, accounts receivable, $265,000; and accounts payable, $86,000 Mary and Kay, Inc. maintains a $85,000 minimum cash balance at all times. Financing is available (and retired) in $1,000 multiples at an 9 percent interest rate, with borrowings taking place at the beginning of the month and repayments occurring at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid at that time . Additional data: Sales Merchandise purchases $658,000 $740,000 $755,000 0,000 155,000 35,000 470,000 113,000 500,000 62 92,000 ences Requir repare a schedule that da 2. Prepare a schedule that discloses the firm's total cash disbursements for January through March. 3. Prepare a schedule that summarizes the firm's financing cash flows for January through March. the firm's total cash collections for January Complete this question by entering your answers in the tabs below Required 1 Required 2 Required 3 e that discloses the firm's total casth of

Answer 1

Answer 1:

Collection accounts receivables in January = $265,000 * 20% = $53,000

Answer 2:

Answer 3:

Loan Interest paid = $38,000 * 9% * 2 / 12 =$570