Question

131 A wholesale hardware distributor sells 40 percent of its products for cash. Credit sales are collected as follows: 132 133 134 135 136 137 25 percent during the month of sale. 70 percent the next month 5 percent are uncollectible. 138 139 All merchandise is purchased on account. During the month of purchase, 30 percent is paid, resulting in a 2 percent discount. All the rest is paid the month following the purchase. All operating expenses are paid in the month incurred except for $600 in depreciation expense. 140 Following are budgeted sales, purchases, and operating expenses of 4 month of the year: 144 145 146 147 Month Sales Purchases Expenses 148 S 149 August September October November 14.000 10.000 8.000 18.000 5.000 4.000 15.000 10.000 8.100 6.500 6.200 9.500 150 Required: Prepare a monthly cash budget for October and November assuming a cash balance on October 1 of $18,800.

Answer 1

Cash Budget
	October	November
Beginning Cash Balance	$           18,800	$             14,590
Collections from Customers	$             8,600	$             13,260
Total Cash available	$           27,400	$             27,850
Deduct : Disbursements
Cash paid to Suppliers	$             7,210	$             13,440
Operating Expenses	$             5,600	$               8,900
Total Cash Disbursements	$           12,810	$             22,340
Ending Cash Balance	$           14,590	$               5,510

Budgeted Cash Receipts
	October	November
Cash Sales	$       3,200.00	$         7,200.00
Current Month Sales (25%)	$       1,200.00	$         2,700.00
Previous Month Sales (70%)	$       4,200.00	$         3,360.00
Total Cash Collections	$       8,600.00	$       13,260.00
Budgeted Cash Receipts
	October	November
Cash Sales	=8000*40%	=18000*40%
Current Month Sales (25%)	=8000*60%*25%	=18000*60%*25%
Previous Month Sales (70%)	=10000*60%*70%	=8000*60%*70%

Budgeted Cash Payments
	October	November
Current Month Purchases (30%)	$       4,410.00	$         2,940.00
Previous Month Purchases (70%)	$       2,800.00	$       10,500.00
Total Cash Payments	$       7,210.00	$       13,440.00
Budgeted Cash Payments
	October	November
Current Month Purchases (30%)	=15000*30%*98%	=10000*30%*98%
Previous Month Purchases (70%)	=4000*70%	=15000*70%