Sophisticate, Inc., a distributor of jewelry throughout California, is in the process of assembling a cash budget for the first quarter of 20X1. The following information has been extracted from the company's accounting records:

All sales are on account. 60% of customer accounts are collected in the month of sale; 35% are collected in the following month.

Uncollectibles amounting to 5% of sales are anticipated, and management believes that only 20% of the accounts outstanding on Dec. 31, 20X0, will be recovered and that recovery will be in January 20X1. 70% of the merchandise purchases are paid for in the month of purchase; the remaining 30% are paid for in the month after acquisiton.

The December 31, 20X0, balance sheet disclosed the following selected figures: cash, $60,000; accounts receivable, $165,000; and accounts payable, $66,000.

Sophisticates, Inc. maintains a $60,000 minimum cash balance at all times. Financing is available (and retired) in $1,000 multiples at an 8% interest rate, with borrowing taking place at the beginning of the month and repayments occurring at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid at the time.

Additional data:

Proceeds from sale of equipment. 15,000

Required:
1. Prepare a schedule that discloses the firm's total cash collections for January through March.
2. Prepare a schedule that discloses the firm's total cash disbursements for January through March.
3. Prepare a schedule that discloses the firm's cash needs, if any, for January through March. The schedule should present the following information in the order cited: Beginning cash balance, total receipts, total payments, the cash excess (deficiency) before financing, borrowing needed, if any, loan principal repaid, if any, loan interest paid, if any, and ending cashbalance.

Transcribed Image Text:

Feb March Jan Sales revenue Merchandise purchases Cash operating costs S450,000 S540,000 S555,000 420,000 135,000 270,000 300,000 93,000 72,000