Cash Collections October November December 4th Quarter September 20,000 - - Octo
ID: 2467238 • Letter: C
Question
Cash Collections
October
November
December
4th Quarter
September
20,000
-
-
October
35,640
November
-
December
-
-
Totals
55,640
-
-
-
Inventory Purchases
October
November
December
4th Quarter
Beginning inventory
36,000
36,000
Purchases
52,200
Goods available
88,200
-
-
Ending inventory
43,200
COGS
45,000
-
-
Cash Disbursements for
Purchases and Operating Expenses
October
November
December
4th Quarter
Last month's Inventory Purchases
21,750
This month's Inventory Purchasees
26,100
Administration
2,500
General
3,600
Commission
7,200
Equipment
1,500
62,650
-
-
-
Overall Cash Budget
October
November
December
4th Quarter
Beginning balance
8,000
Cash collections
55,640
Cash inflows
63,640
-
-
Cash payments
62,650
Net cash
990
-
-
Borrowing
4,000
Repayment-principal
-
Repayment-interest
-
Ending balance
4,990
-
-
Pro Forma Income Statement
October
November
December
4th Quarter
Revenues
60,000
COGS
45,000
Gross margin
15,000
General & Commission
10,800
Adminstration
2,500
Depreciation
900
Sales discounts
360
Bad debt expense
240
Interest expense
40
Net Income
160
Pro Forma Balance Sheet
Cash
$X,XXX
A/R (gross)
$XX,XXX
Less: AFDA*
XXXX
XX,XXX
Inventory
XX,XXX
Net current assets
XX,XXX
Fixed assets
XXX,XXX
Less: depreciation
X,XXX
XXX,XXX
Total assets
$XXX,XXX
Accounts payable
XX,XXX
Notes payable (line of credit)
X,XXX
Interest payable
XX
Current liabilities
XX,XXX
Stockholders' Equity:
Common stock
XXX,XXX
Retained earnings
XX,XXX
Total S/Equity
XXX,XXX
Total Liab. and S/E
$XXX,XXX
FILL THE BLANK WITH THE INFORMATION PROVIDES BELOW:
Data on September 30, 2009 (the end of the third quarter)
Account
Debit
Credit
Cash
8,000
Account Receivable
20,000
Inventory
36,000
Building and equipment, net of depreciation
120,000
Accounts payable
21,750
Common stock
150,000
Retained Earnings
12,250
Total
184,000
184,000
Actual sales and Forecast
Month
Sales
September (actual)
50,000
October
60,000
November
72,000
December
90,000
January 2010
48,000
1) Forecast gross accounts receivable at $36,528 on the December 31 balance sheet. In addition, to $36,000 in receivables from December sales, this amount includes unwritten off bad debts forecast for October and November.
2) Ensure 25% Gross Profit Margin on sales
+ Assume that the 25% gross profit margin applies to gross sales and not to net sales (those adjusted for cash payments or bad debts).
3) 60% of customers pay in cash ( Those customers receive a 1% discount on the invoice price)
+ Account for 1% cash discount as part of operating expenses (rather than as the more technically correct reduction of gross sales) when constructing the pro forma income statements in order to be consistent with the bullet point above.
4) 40% of customers pay on account
5) Credit sales terms are n/2EOM, credit terms requiring payment by the end of the month following purchase
6) Will collect all of the 20,000 accounts receivable balance at Sep 30 by the end of October
7) Bad debt expense and the allowance for doubtful accounts have 0 balance at Sep 30
Third quarter monthly expense
Monthly Expense Item
Amount
Administration
2,500
General
6% of sales
Commission
12% of sales
Depreciation
850
8) Inventory balance equaled 80% of the next month’s COGs
9) Account payable clerk pays one-half of each month’s inventory cost in the month of acquisition, and the remaining 50% in the following month
10) Cash purchase of 1,500 for Scanning devices in early October ( The firm will depreciate this equipment over thirty months on the straight line basis
11) Maintain an ending monthly cash balance of 4,000 to remain financially flexible
12) The company has an open line of credit with its banking partner to ensure that it can meet its cash balance goal (12% annual interest rate for all short-term borrowings.)
13) The company has 0 tax rate, due to previous tax losses
Cash Collections
October
November
December
4th Quarter
September
20,000
-
-
October
35,640
November
-
December
-
-
Totals
55,640
-
-
-
Inventory Purchases
October
November
December
4th Quarter
Beginning inventory
36,000
36,000
Purchases
52,200
Goods available
88,200
-
-
Ending inventory
43,200
COGS
45,000
-
-
Cash Disbursements for
Purchases and Operating Expenses
October
November
December
4th Quarter
Last month's Inventory Purchases
21,750
This month's Inventory Purchasees
26,100
Administration
2,500
General
3,600
Commission
7,200
Equipment
1,500
62,650
-
-
-
Overall Cash Budget
October
November
December
4th Quarter
Beginning balance
8,000
Cash collections
55,640
Cash inflows
63,640
-
-
Cash payments
62,650
Net cash
990
-
-
Borrowing
4,000
Repayment-principal
-
Repayment-interest
-
Ending balance
4,990
-
-
Pro Forma Income Statement
October
November
December
4th Quarter
Revenues
60,000
COGS
45,000
Gross margin
15,000
General & Commission
10,800
Adminstration
2,500
Depreciation
900
Sales discounts
360
Bad debt expense
240
Interest expense
40
Net Income
160
Pro Forma Balance Sheet
Cash
$X,XXX
A/R (gross)
$XX,XXX
Less: AFDA*
XXXX
XX,XXX
Inventory
XX,XXX
Net current assets
XX,XXX
Fixed assets
XXX,XXX
Less: depreciation
X,XXX
XXX,XXX
Total assets
$XXX,XXX
Accounts payable
XX,XXX
Notes payable (line of credit)
X,XXX
Interest payable
XX
Current liabilities
XX,XXX
Stockholders' Equity:
Common stock
XXX,XXX
Retained earnings
XX,XXX
Total S/Equity
XXX,XXX
Total Liab. and S/E
$XXX,XXX
Explanation / Answer
Cash Collections October November December 4th Quarter September 20,000 - - Octo