Prepare a schedule of expected cash collections for

Question

PROBLEM Schedules of Expected Cash Collections and Disbursements

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 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 uncollectable.

	July	August	September
Cash sales.......................	S 6,500	S 5,250	S 7,400
Sales on account..............	20,000	30,000	40,000
Total sales........................	$26,500	$35,250	$47,400
			1111=11i

c. Purchases of inventory will total $25,000 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 $16,000, 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 total­ling $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 position as needed.

Required:

1. Prepare a schedule of expected cash collections for September.

2. Prepare a schedule of expected cash disbursements during September for inventory purchases.

3. Prepare a cash budget for September. Indicate in the financing section any borrowing that will be needed during September.