Cash Budget Extra Credit
Rahman Products, a distributor of organic beverages, needs a cash budget for December.
The following information is available:
a. The cash balance at the beginning of December $12,000.
b. Actual sales for October and November and expected sales for June are as follows:
|
|
October
|
November
|
December
|
|
Cash Sales
|
$ 7,500
|
$ 6,250
|
$ 6,000
|
|
Sales on account
|
20,000
|
32,000
|
40,000
|
|
Total Sales
|
$26,500
|
$35,250
|
$47,400
|
Sales on account are collected over a three-month period in the following ratio:
10% collected in the month 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 December. Twenty percent of a month's inventory purchases are paid for during the month of purchase. The accounts payable remaining from November's inventory purchases total $16,000, all of which will be paid in December.
d. Selling and administrative expenses are budgeted at $13,000 for December. Of this amount, $4,000 is for depreciation. Purchase of a copier in December for $4,000.
e. Equipment costing $18,000 will be purchased for cash during December, and dividends totaling $3,000 will be paid during the month. Sale of old assets in December for $1,000.
f. The company must maintain a minimum cash balance of $6,000. An open line of credit is available from the company's bank to bolster the cash position as needed.
Required:
1. Prepare a cash budget for December. Indicate in the financing section any borrowing that will be needed during December.
2. Prepare a schedule of expected cash collections for December.
3. Prepare a schedule of expected cash disbursement for December.