PROBLEM 8–16 Schedules of Expected Cash Collections and Disbursements[LO2, LO4, LO8]Calgon Products, a distributor of organic beverages, needs a cash budget for September. The following information is available:
a. The cash balance at the beginning of September is $9,000.
b. Actual sales for July and August and expected sales for September are as follows:
|
July |
August |
September |
||
|
Cash sales . . . . . . . . . . . |
$ 6,500 |
$ 5,250 |
$ 7,400 |
|
|
Sales on account . . . . . . |
20,000 |
30,000 |
40,000 |
|
|
Total sales . . . . . . . . . . . . |
$26,500 |
$35,250 |
$47,400 |
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.
c. Purchases of inventory will total $25,000 for September. Twenty percent of a month’s inven- tory purchases are paid for during the month of purchase. The accounts payable remaining from August’s inventory purchases total $16,000, all of which will be paid in September.
d. Selling and administrative expenses are budgeted at $13,000 for September. Of this amount,
$4,000 is for depreciation.
e. Equipment costing $18,000 will be purchased for cash during September, and dividends total- ing $3,000 will be paid during the month.
f. The company maintains a minimum cash balance of $5,000. An open line of credit is available from the company’s bank to bolster the cash balance as needed.
Required:
1. Prepare a schedule of expected cash collections for September.
2. Prepare a schedule of expected cash disbursements for inventory purchases for September.
3. Prepare a cash budget for September. Indicate in the financing section any borrowing that will be needed during September. Assume that any interest will not be paid until the following month
