Queetion 1 (of 2 30.00 points Calgon Products a distributor of organic beverages
ID: 2513459 • Letter: Q
Question
Queetion 1 (of 2 30.00 points Calgon Products a distributor of organic beverages, needs a cash budgot for September. The following informaton is available a The cash balance at the begineing of September is $9,100 b Actual sales for July and August and expected salos for Seplember are as showm below Sales on accountre colected over a three-month pend as Solows 10% collected in the month of sale, 70% cole ted in the month folowing sale and 18% collected in the second month folowing sale The remaining 2% is une olectble $ 6,700 $5,3501S 7,480 Sales on account 21,000 32,00042.000 Total sales$27, 700 $37.350 $49,480 c. Purchases of inventory will total $26,000 for Seplember. Twenty percent of a month's inven purchases are paid for during nventory purchases total $17.200, all of which will be paid in September the month of purchase. The accounts payable remaining from Augusts d. Selling and administrative expenses are budgeted at 514,000 for September Of this amount, $4 400 e. Equipment costing $19,000 will be purchased for cash during Seplember, and dividends totaling $3,260 t The company maintains a minimum cash balance of $5 200. An open line of credit is available from the will be paid during the month company's bank to bolster the cash postion as needed Assume any bonrowings occur at the beginning of the month and repayments occur at the end of the month Interest on outstanding loan balances duning the month must be pad atthe end of each month The monthly interest rato 0.5% Required: 1. Prepare a schedule of expected cash collections for September September cash sales September collections on account July sales August sales Seplember sales 22,400 Total cash collections S 30,380 2. Prepare a schedule of expected cash disbursements dunng September for inventoryExplanation / Answer
Solution:
Part 1 ---
Schedule of Expected Cash Collections for September
$$
September Cash Sales
$7,480
September collections on account:
July Sales (21,000*18%)
$3,780
August Sales (32,000*70%)
$22,400
September Sales (42,000*10%)
$4,200
Total Cash Collections
$37,860
Part 2 – Schedule of Expected Cash Disbursements during September for Inventory Purchases
$$
Payments to Suppliers:
August Purchases (Accounts Payable)
$17,200
September Purchases ($26,000*20%)
$5,200
Total Cash payments
$22,400
Part 3 – Cash Budget
Cash Budget for the month of September
$$
$$
Cash balance, Sept. 1
$9,100
Add: Cash receipts:
Collections from customer
$37,860
Total cash available before current financing
$46,960
Less: Disbursements
Payment to supply for inventory
$22,400
Selling and admn Expense (excluding depreciation since it is a non cash item) (14,000 - 4,400)
$9,600
Equipment Purchase
$19,000
Dividend Paid
3260
Total Cash Disbursements
$54,260
Excess (Deficiency) of available cash over cash disbursements
($7,300)
Financing:
Borrowings
$12,563
Repayment
$0
Interest ($12,438*0.5%)
($63)
Total Financing
$12,500
Cash Balance September 30
$5,200
Note --- Company is required to maintain minimum balance $5,200
So deficiency is $7,300 in order to make minimum balance we need to finance $12,500 to be an ending cash balance $5,200
Since interest is also paid in the month of borrowing. So we need to borrow the amount including interest.
Hence, Total Borrowing = $12,500 / (100% - 0.5%) = $12,563
Interest on Borrowing = 12,563*0.5% = $63
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Schedule of Expected Cash Collections for September
$$
September Cash Sales
$7,480
September collections on account:
July Sales (21,000*18%)
$3,780
August Sales (32,000*70%)
$22,400
September Sales (42,000*10%)
$4,200
Total Cash Collections
$37,860