Question

Cash Budget

Khloe Company imports gift items from overseas and sells them to gift shops and department stores throughout the United States. Khloe Company provided the following information:

1. The October 31 balance in the cash account is $53,965.
2. All sales are on account. Sales in September were $980,000 and in October were $1,350,000.
3. November sales are expected to be $2,180,000.
4. In Khloe’s experience, 70 percent of sales are collected in the month of sale and 27 percent are collected in the month following sale. The remaining credit sales are uncollectible.
5. Khloe purchases all merchandise on account. Purchases in September were $725,000 and in October were $950,000. November purchases are expected to be $2,020,000 as Khloe prepares for the Christmas buying season. Fifteen percent of purchases are paid in the month of purchase, while the remainder is paid in the month following the purchase month.
6. Khloe Company has nine employees who are paid a total of $42,000 per month. Due to timing issues, about 90 percent of total wages are paid in the month earned and the remaining 10 percent are paid in the following month.
7. Rent for office and warehouse space is $12,300 paid monthly in cash.
8. Utilities average $5,500 per month and are paid in cash.
9. In November, Khloe expects to pay employment taxes of $6,725.
10. Since Khloe imports product from overseas, customs duty and shipping to the central location of 15 percent of current monthly purchase cost must be paid in the month of purchase.
11. Other cash expenses for November are expected to be $40,500.

Required

Prepare a cash budget for Khloe Company for the month Khloe Company Cash Budget For the Month of November Beginning balance, cash account $ Received on account from sales in: October November Total cash available Disbursements: Payments for purchases made in: October 11 m November Salaries paid for work in: October November Rent Utilities ı Employment taxes Customs duty and shipping Other cash expenses Total disbursements . Ending cash balance

Answer 1

Answer

Particulars	Amount ($)
Beginning balance, cash account	$      53,965
Received on account from sales in:
October (1,350,000*27%)	$    364,500
November (2,180,000*70%)	$ 1,526,000
Total cash available (A)	$ 1,944,465
Disbursements:
Payments for purchases made in:
October (950,000*85%)	$    807,500
November (2,020,000*15%)	$    303,000
Salaries paid for work in:
October (42,000*10%)	$        4,200
November (42,000*90%)	$      37,800
Rent	$      12,300
Utilities	$        5,500
Employment taxes	$        6,725
Customs duty and shipping (2,020,000*15%)	$    303,000
Other cash expenses	$      40,500
Total disbursements (B)	$ 1,520,525
Ending cash balance (A-B)	$    423,940

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