Accounting Principles II Homework: Cash Budget Practice Problem Randall Company is a merchandising company that sells a single product. The company's inventories, cost of goods sold, and sales in dollars for the next two months have been forecasted as follows: October November Beginning inventory ......................................................................................12,000 ???? Cost of Goods Sold .......................................................................................45,000 95,000 Sales ............................................................................................................80,000 190,000 Ending inventory ........................................................................................... 5,000 10,000 35% of all sales are cash sales and the remainder are credit sales. 50% of the credit sales are collected in the 1st month following the sale and 45% collected the 2nd month following. September sales totaled $100,000 and August sales totaled $60,000. All inventory purchases are made on account. Half of the purchases are paid for in the month of the purchase and the remainder are paid in the month following purchase. The balance for inventory purchases in Accounts Payable on September 30 totaled $16,000. Salaries paid during each month total $17,000. Other selling and administrative expenses to be paid each month are expected to be 10% of sales. Cash at September 30 totaled $10,000. A cash dividend in the amount of $15,000 will be paid in October. Randall Company has established a credit line with the bank to assist with cash flow needs. Randall is required to maintain a minimum balance of $10,000 in its bank account and may borrow funds at any time from the bank in an amount not to exceed $100,000 at any one time. Borrowing and repayment must be made in $1,000 increments. Interest is 12% and is paid on the full balance owed when principal payments are made. Principal payments are unscheduled and the timing of principal payments is left to the discretion of Randall Company whenever sufficient excess cash flow is available to make payments. As of September 30, there were no funds borrowed. Borrowing always occurs at the beginning of a month and repayments always occur at the end of a month. REQUIRED Prepare, in good form, the following schedules for the two-month period: Oct and Nov. 1. Schedule of Cash Collections 2. Schedule of Inventory Purchases 3. Schedule of Cash Disbursements for Inventory Purchases 4. Schedule of Cash Disbursements for Operating Expenses 5. Cash Budget