Question

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[LO 10-4) 10-26 Budgeted Cash Receipts and Cash Disbursements Timpco, a retailer, makes both cash and credit sales (.e., sales on open account). Information regarding budgeted sales for the last quarter of the year is as follows: October November December Cash sales Credit sales $100,000 100,000 $200,000 $ 120.000 150,000 $ 270,000 $ 80,000 90,000 $ 170,000 Total Past experience shows that 5% of credit sales are uncollectible. Of the credit sales that are collect- ible, 60% are collected in the month of sale; the remaining 40% are collected in the month following the month of sale. Customers are granted a 1.5% discount for payment within 10 days of billing. Approximately 75% of collectible credit sales take advantage of the cash discount.

Answer 1

1. Budgeted Total Cash Receipts for November & December:

Particulars	Calculation	November	Calculation	December
1. Cash Sales	Given	120,000	Given	80,000
2. Cash from Credit Sales (in the same month @ 60%)	150,000*95%*60%	85,500	90,000*95%*60%	51,300
3. Cash from Credit Sales (of previous month @ 40%)	100,000*95%*40%	38,000	150,000*95%*40%	57,000
4. Cash Discount 1.5%	[(150,000*95%)*75%]*1.5%	(1,603.125)	[(90,000*95%)*75%]*1.5%	(961.875)
5. Budgeted Cash Receipts (1+2+3-4)	120,000+85,500+38,000-1,603.125	241,896.875	80,000+51,300+57,000-961.875	187,338.125

2. Budgeted Cash Disbursements for November & December:

Particulars	Calculation	November	Calculation	December
1. Projected Sales for the following month	Given	170,000	Given	200,000
2. Gross Profit @ 30%	170,000*30%	(51,000)	200,000*30%	(60,000)
3. Cost of Goods Sold (Inventory Purchase for the month)	170,000-51,000	119,000	170,000-51,000	140,000
4. Paid in the same month @ 25%	119,000*25%	29,750	140,000*25%	35,000
5. Paid in following month @ 75%	(270,000*70%)*75%	141,750	119,000*75%	89,250
6. Budgeted Cash Disbursements (4+5)	29,750+141,750	171,500	35,000+89,250	124,250

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