Question

Information pertaining to Noskey Corporation's sales revenue follows: Cash sales Credit sales Total sales November 2018 (Actual) $ 105,000 270,000 $ 375,000 December 2018 (Budgeted) $ 115,000 395,000 $ 510,000 January 2019 (Budgeted) $ 70,000 200,000 $ 270,000 Management estimates 5% of credit sales to be uncollectible. Of collectible credit sales, 60% is collected in the month of sale and the remainder in the month following the month of sale. Purchases of inventory each month include 70% of the next month's projected total sales (stated at cost) plus 30% of projected sales for the current month (stated at cost). All inventory purchases are on account; 25% is paid in the month of purchase, and the remainder is paid in the month following the month of purchase. Purchase costs are approximately 60% of the selling price. Required: Determine for Noskey: 1. Budgeted cash collections in December 2018 from November 2018 credit sales. 2. Budgeted total cash receipts in January 2019. 3. Budgeted total cash payments in December 2018 for inventory purchases.

Answer 1

Solution 1:

Budgeted cash collection in December from November credit sales = $270000*95%*40% = $102,600

Solution 2:

Noskey Corporation
Budgeted Total Cash receipts
Jan-19
Cash sales in January		70000
Collections from credit sales in January:
Total Collectible from credit sales (200000*95%)	190000
Percentage to be collected in January	60%	114000
Collections from credit sales in December:
Total Collectible from credit sales (395000*95%)	375250
Percentage to be collected in January	40%	150100
Budgeted Total Cash receipts in January		334100

Solution 3:

Noskey Corporation
Budgeted Total Cash payments
Dec-18
Total Inventory purchases in November:
For November Sales: (375000*30%*60%)	67500
For December sales: (510000*70%*60%)	214200	281700
Percentage of November purchases to be paid in December		75%
Payment in December for Purchases in November		211275
Budgeted purchases in December:
For December sales: (510000*30%*60%)	91800
For January sales: (270000*70%*60%)	113400	205200
Percentage of December purchases to be paid in December		25%
Payment in December for Purchases in December		51300
Budgeted cash payment in December for Inventory purchases		262575