Question

Timpco, a retailer, makes both cash and credit sales (i.e., sales on open account). Information regarding budgeted sales for the last quarter of the year is as follows:

	October			November			December
Cash sales	$	140,000		$	115,000		$	105,000
Credit sales		140,000			138,000			115,500
Total	$	280,000		$	253,000		$	220,500

Past experience shows that 5% of credit sales are uncollectible. Of the credit sales that are collectible, 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.

Inventory purchases each month are 100% of the cost of the following month’s projected sales. (The gross profit rate for Timpco is approximately 30%.) All merchandise purchases are made on credit, with 20% paid in the month of purchase and the remainder paid in the following month. No cash discounts for early payment are in effect.

Required:

1. Calculate the budgeted total cash receipts for November and December. (Round your intermediate calculations and final answers to the nearest whole dollar amount.)

2. Calculate budgeted cash disbursements for November and December (budgeted total sales for January of the coming year equals $205,000).

Answer 1

cash receipts November

November
Cash sales	$115000
collection of accounts receivable
($140000*0.95)*0.40*0.75*0.985 [October collection with discount]	39302
($140000*0.95)*0.40*0.25 [October collection without discount]	13300
(138000*0.95)*0.60*0.75*0.985 [November collection with discount]	58110
(138000*0.95)*0.60*0.25 [November collection without discount]	19665
total cash receipts for November	245377$
total cash receipts for December
Cash sales	105000
collection of accounts receivable
($138000*0.95)*0.40*0.75*0.985 [November collection with discount]	38740
($138000*0.95)*0.40*0.25 [November collection without discount]	13110
(115500*0.95)*0.60*0.75*0.985 [November collection with discount]	48636
(115500*0.95)*0.60*0.25 [November collection without discount]	16459
total cash receipts for November	221945$
2.budgeted cash disbursements for November
October payment [253000*0.70]*.80	141680
November payment [220500*0.70]*.20	30870
budgeted cash disbursements for November	172550$
budgeted cash disbursements for December
November payment [220500*0.70]*.80	123480
december Payment [205000*0.70]*0.20	28700
budgeted cash disbursements for December	152180