ABC Company is a distributor of paper products. The following information was provided regarding the

companys operations

i. The following table shows the actual monthly sales totals for the months of September and

October as well as the budgeted sales for November, December, and January (Yr2).

September October November December

Cash sales $48,000 $45,000 $51,000 $67,000

Sales on account $384,000 $360,000 $408,000 $536,000

ii. Payment for cash sales is received at the time of purchase. ABC Company also allows its regular

customers to purchase products on account. For sales on account payment is received for 25%

of sales in the month the sale is made, 65% received in the month following the sale, and the

remaining 10% is collected 2 months after the sale.

iii. The opening cash balance on November 1st is $62,000

iv. ABC Company maintains a minimum cash balance of at least $20,000.

v. ABC Company has a line of credit available from its bank to borrow additional cash as needed.

ABC Company pays 12% on funds borrowed on the line of credit. Assume that any funds needed

are borrowed on the first day of the month, and repayments are made on the last day of the

month when cash is available to repay loans. Interest is payable at the beginning of the

following month

vi. The following table shows the amounts paid each month for merchandise purchases

September October November December

Amount purchased $234,700 $229,000 $268,500 $305,500

vii. 40% of the balance owing for merchandise purchases is paid during the month that merchandise

is purchased. The remaining 60% if paid the following month

viii. The following table outlines ABC Companys selling and administrative expenses. The monthly

amounts each include $45,000 for monthly straight-line depreciation on company assets.

September October November December

Selling and administrative $233,200 $230,500 $235,900 $240,300

ix. During November ABC Company will be paying a dividend of $50,000 to its shareholders.

Required

1. Calculate the amount of cash collected on sales for November and December

2. Calculate the balance of accounts receivable at the end of November and the end of December

3. Calculate the amount of cash disbursements for merchandise purchases for November and

December

4. Prepare a cash budget for November and December. See below for a template for how to set up a table for your budget ABC Company Cash Budget

For the month of: November December

Beginning cash balance

Add collections from customers

Total cash available

Less cash disbursements:

Payments to suppliers for inventory

Selling and administrative

Dividends paid

Total cash disbursements

Excess (deficiency) of cash available over disbursements

Financing

Borrowing

Repayments

Interest

Total financing

Ending cash balance