CH9 Calgon Products, a distributor of organicbeverages, needs a cash budget for
ID: 2590046 • Letter: C
Question
CH9
Calgon Products, a distributor of organicbeverages, needs a cash budget for September. The following information is available a.The cash balance at the beginning of September is $9,050 b.Actual sales for July and August and expected sales for September are as shown below. Sales on account are collected over a three-month period as follows: 10% collected in the month of sale, 70% collected in the month following sale, and 18% collected in the second month following sale. The remaining 2% is uncollectible July August September Cash sales $ 6,600 $ 5,300 $ 7,440 Sales on account 20,500 31,000 41,000 Total sales $27,100 $36,300 $48,440 c. Purchases of inventory will total $25,500 for September. Twenty percent of a month's inventory purchases are paid for during the month of purchase. The accounts payable remaining from August's inventory purchases total $16,600, all of which will be paid in September. d. Selling and administrative expenses are budgeted at $13,500 for September. Of this amount, e. Equipment costing $18,500 will be purchased for cash during September, and dividends totalling f. The company maintains a minimum cash balance of $5,100. An open line of credit is available from $4,200 is for depreciation. $3,180 will be paid during the month. the company's bank to bolster the cash position as needed. Assume any borrowings occur at the beginning of the month and repayments occur at the end of the month. Interest on outstanding loan balances during the month must be paid at the end of each month. The monthly interest rate is 0.5%. Required 1. Prepare a schedule of expected cash collections for September. September cash sales September collections on account: $ 7,440 July sales August sales September sales Total cash collections $ 7,440 2. Prepare a schedule of expected cash disbursements during September for inventory purchases Payments to suppliers August purchases (accounts payable) September purchases Total cash paymentsExplanation / Answer
1) Preparation of the Schedule of Expected Cash Collections for September Amount $ Septemebr Cash Sales : 7,440 Septemebr Sales on account July Sales (20500*18%) 3,690 August Sales (31000*70%) 21,700 September Sales (41000*10%) 4,100 Total Cash Collections 36,930 2) Preparation of the Schedule of the Expected Cash Disbursment during the September for Inventory Purchases : Amount $ Payment to Suppliers : August Purchases(Accounts Payable) 16,600 September Purchases (25500*20%) 5,100 Total Cash Payments 21,700