Question

Graham Potato Company has projected sales of $10,800 in September, $14,000 in October, $20,800 in November, and $16,800 in December. Of the company's sales, 30 percent are paid for by cash and 70 percent are sold on credit. Experience shows that 40 percent of accounts receivable are paid in the month after the sale, while the remaining 60 percent are paid two months after. Determine collections for November and December. Also assume Graham's cash payments for November and December are $17,500 and $10,000, respectively. The beginning cash balance in November is $5,000, which is the desired minimum balance. a. Prepare a cash receipts schedule for November and December. Graham Potato Company Cash Receipts Schedule September October November December Sales Credit sales Cash sales One month after sale Two months after sale Total cash receipts

Answer 1

Cash Receipts Schedule
	Sep	Oct	Nov	Dec
Sales	10,800	14,000	20,800	16,800
Credit Sales	7,560	9,800	14,560	11,760
Cash Sales	3,240	4,200	6,240	5,040
One month after sale			3,920	5,824
Two months after sale			4,536	5,880
Total cash receipts			14,696	16,744
Cash Budget
	Nov	Dec
Total casg receipts	14,696	16,744
Total Cash payments	17500	10000
Net cash flow	(2,804)	6,744
Beginning cash balance	5000	5,000
Cumulative cash balance	2,196	11,744
Monthly borrowing	2,804	(2,804)
Ending cash balance	5,000	8,940
Cumulative Loan balance	2,804	0