Question

Garda purchased $570,000 of merchandise in August and expects to purchase $790,000 in September. Merchandise purchases are paid as follows: 20% in the month of purchase and 80% in the following month. Compute cash payments for merchandise for September. GARDA Cash payments for Merchandise (Budgeted) For Month Ended September 30 Cash payments for September purchases Cash payments for August purchases Total budgeted cash payments

Answer 1

GIRDA
Cash payments for Merchandise (Budgeted)
For the month ended September 30
Cash payments for September purchases	$1,58,000
	($790,000 * 20%)
Cash payments for August purchases	$4,56,000
	($570,000 * 80%)
Total budgeted cash payments	$6,14,000

FOYERT CORP.
Cash Budget
For October, November and December
	October	November	December
a. Beginning cash balance	$6,300	$6,300	$6300
b. Cash receipts	$22,300	$16,300	$20,300
c. Cash payments	$24,450	$15,300	$15,700
d. Interest on borrowings @ 2% per month	$46	$90	$72
	($2,300 * 2%)	($2,300 + $2,196) * 2%	($2,300 + $2,196 - $910) * 2%
e. Preliminary cash balance (a + b - c - d)	$4,104	$7,210	$10,828
f. Borrowings / (Repayment)	$2,196	$ -910	$ -3586
g. Ending cash balance (e + f)	$6,300	$6,300	$7,242
Loan Balance
h. Loan balance - Beginning of the month	$2,300	$4,496	$3,586
i. Additional loan / (loan repayment)	$2,196	$ -910	$ -3,586
j. Loan balance - End of month (h + i)	$4,496	$3,586	0

HARDY Company
Calculation of monthly purchases
For August, September, October and November
	August	September	October	November
a. Total sales	$385,000	$410,000	$330,000	$380,000
b. Cost of goods sold (60% of sales)	$231,000	$246,000	$198,000	$228,000
	($385,000 * 60%)	($410,000 * 60%)	($330,000 * 60%)	($380,000 * 60%)
c. Ending merchandise inventory	$49,200	$39,600	$45,600
(20% of next month budgeted cost of goods sold)	($246,000 * 20%)	($198,000 * 20%)	($228,000 * 20%)
d. Beginning merchandise inventory	$46,200	$49,200	$39,600
	($231,000 * 20%)	($246,000 * 20%)	($198,000 * 20%)
e. Required purchases (a + c - d)	$388,000	$400,400	$336,000

Calculation of payments made for Inventory
		Purchases paid in
	Purchases	August	September	October	After October
August Purchases	$388,000	$155,200	$174,600	$58,200
		($388,000 * 40%)	($388,000 * 45%)	($388,000 * 15%)
September Purchases	$400,400		$160,160	$180,180	$60,060
			($400,400 * 40%)	($400,400 * 45%)	($400,400 * 15%)
October Purchases	$336,000			$134,400	$201,600
				($336,000 * 40%)	($336,000 * 60%)
Total		$155,200	$334,760	$372,780	$261,660

October's expected cash payments for purchases = $372,780