Compute cash receipts and payments (Learning Objective 3)

Aqua Pure is a distributor of bottled water. For each of the items a through

c, com¬ pute the amount of cash receipts or payments Aqua Pure will budget for September. The solution to one item may depend on the answer to an earlier item.

a. Management expects to sell equipment that costs $14,000 at a gain of $2,000. Accumulated depreciation on this equipment is $7,000.

b. Management expects to sell 7,500 cases of water in August and 9,200 in September. Each case sells for $12. Cash sales average 30% of total sales, and credit sales make up the rest. On average, three-fourths of credit sales are col¬ lected in the month of sale, with the balance collected the following month.

c. The company pays rent and property taxes of $4,200 each month. Commissions and other selling expenses average 25% of sales. Aqua Pure pays two-thirds of commissions and other selling expenses in the month incurred, with the balance paid the following month.