Question

The following sales and purchases forecast information pertains to Palermo Corporation: Month July August September October November December Sales $13,000 16,000 18,000 23,000 22,500 28,400 Purchases $6,000 5,700 7,500 8,300 9,200 10,100 Based on past experience cash is typically collected from customers in the following manner: Collected within 10 days of sale so receive a 10% cash discount 25% Collected after 10 days but in the month of sale 10% Collected in the month following the sale 40% Collected in the second month following the sale 20% Amount of accounts that are uncollectible 5% 40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month. Required: a. Based on this information prepare a monthly summary of cash collections for the 4th quarter (Oct., Nov., Dec.). October November December Total b. Prepare a monthly of cash disbursements for purchases for the 4th quarter (Oct., Nov., Dec.). October November December Total

Answer 1

1.

Schedule of Expected Cash Collections
	October	November	December	Quarter
Credit Sales from				$                    -
August	$           3,200
September	$           7,200	$             3,600		$           10,800
October	$           7,475	$             9,200	$              4,600	$           21,275
November		$             7,313	$              9,000	$           16,313
December			$              9,230	$             9,230
Total Cash Collections	$         17,875	$           20,113	$            22,830	$           60,818

2.

Schedule of Expected Cash Disbursements
	October	November	December	Quarter
Credit Purchases from				$                    -
September	$           4,500			$             4,500
October	$           3,320	$             4,980		$             8,300
November		$             3,680	$              5,520	$             9,200
December			$              4,040	$             4,040
Total Cash Disbursements	$           7,820	$             8,660	$              9,560	$           26,040