For the months of December and January, Joseph Pharmacy had sales of $25,000 and
ID: 2743908 • Letter: F
Question
For the months of December and January, Joseph Pharmacy had sales of $25,000 and $30,000 respectively. The business anticipates sales of $20,000 in February, $40,000 in March, $40,000 in April, and $30,000 in May. No other source of cash flows exists. Fifty percent of the sales are paid with cash, and twenty-five percent are paid in cash for each of the two months following the sale. The pharmacy has the following expenses:
1. $1,500 monthly rent
2. $5,000 for wages each month
3. Purchases of fifty percent of next month’s sales
4. Cash Outlay
5. Twenty per in month purchased
6. Eighty percent in following month
Calculate the projected Cash Receipts for the three months of February, March, and April.
Sales forecast
December
January
February
March
April
Cash Sales
Collection of AR:
Lagged 1 Month
Lagged 2 Months
Other Cash Receipts
Total Cash Receipts
Calculate the projected Cash Disbursements for the same months
A Schedule of Projected Cash Disbursements for Joseph Pharmacy
Sales
December
January
February
March
April
Purchases
(50% of next month’s sales)
Current month .20
1 month lag .80
Rent payments
Wages/Salaries
Total
Indicate what the total cash balance would be at the end of these three months if the cash balance at the beginning of February was $1,500.
February Cash balance
Total Cash Receipts
December
January
February
March
April
Cash Disbursements
Balance
Balance from Feb - April
For the months of December and January, Joseph Pharmacy had sales of $25,000 and $30,000 respectively. The business anticipates sales of $20,000 in February, $40,000 in March, $40,000 in April, and $30,000 in May. No other source of cash flows exists. Fifty percent of the sales are paid with cash, and twenty-five percent are paid in cash for each of the two months following the sale. The pharmacy has the following expenses:
1. $1,500 monthly rent
2. $5,000 for wages each month
3. Purchases of fifty percent of next month’s sales
4. Cash Outlay
5. Twenty per in month purchased
6. Eighty percent in following month
Calculate the projected Cash Receipts for the three months of February, March, and April.
Sales forecast
December
January
February
March
April
Cash Sales
Collection of AR:
Lagged 1 Month
Lagged 2 Months
Other Cash Receipts
Total Cash Receipts
Calculate the projected Cash Disbursements for the same months
A Schedule of Projected Cash Disbursements for Joseph Pharmacy
Sales
December
January
February
March
April
Purchases
(50% of next month’s sales)
Current month .20
1 month lag .80
Rent payments
Wages/Salaries
Total
Indicate what the total cash balance would be at the end of these three months if the cash balance at the beginning of February was $1,500.
February Cash balance
Total Cash Receipts
December
January
February
March
April
Cash Disbursements
Balance
Balance from Feb - April
Sales forecast
December
January
February
March
April
Cash Sales
Collection of AR:
Lagged 1 Month
Lagged 2 Months
Other Cash Receipts
Total Cash Receipts
Explanation / Answer
(1) projected Cash Receipts for the three months of February, March, and April
December January February March April
cash sales 25000*50% 30000*50% 20000*50% 40000*50% 40000*50%
= 12500 =15000 =10000 =20000 =20000
collection of AR
lagged 1 month
December(25000*25%) 6250
January(30000*25%) 7500
February(20000*25%) 5000
March(40000*25%) 10000
lagged 2 month
December(25000*25%) 6250
January(30000*25%) 7500
February(20000*25%) 5000
Total cash receipt 12500 21250 23750 32500 35000
Note:- lagged 1 month AR collection after sales means cash will be collected after the month of sale
lagged 2 month AR collection after sales means cash will be collected after the 2nd month of sale
(2) projected Cash disbursement for the three months of February, March, and April
December January February March April
purchase (50% of
next month sale) 30000*50% 20000*50% 40000*50% 40000*50% 30000*50% =15000 =10000 =20000 =20000 =15000
current month (0.20) 15000*20% 10000*20% 20000*20% 20000*20% 15000*20%
=3000 =2000 =4000 =4000 =3000
1month lag(0.80)
december 15000*80%
=12000
January 10000*80%
=8000
February 20000*80%
=16000
March 20000*80%
=16000
Rent payment 1500 1500 1500 1500 1500
wages and salary 5000 5000 5000 5000 5000
Total 24500 30500 38500 46500 40500
(3) total cash balance would be at the end of these three months if the cash balance at the beginning of February was $1,500
December January February March April
opening balance
1500
(13250)
(27250)
Total Cash Receipts
23750
32500
35000
Cash Disbursements
(38500)
(46500)
(40500)
Balance at end
1500
(13250)
(27250)
(21750)
opening balance
1500
(13250)
(27250)
Total Cash Receipts
23750
32500
35000
Cash Disbursements
(38500)
(46500)
(40500)
Balance at end
1500
(13250)
(27250)
(21750)