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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
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 $11,000. |
b. | Actual sales for July and August and expected sales for September are as follows: |
July | August | September | ||||
Cash sales | $ | 5,500 | $ | 5,000 | $ | 8,600 |
Sales on account | 22,000 | 26,000 | 44,000 | |||
Total sales | $ | 27,500 | $ | 31,000 | $ | 52,600 |
| | | | | | |
Sales on account are collected over a three-month period as follows: 5% collected in the month of sale, 60% collected in the month following sale, and 31% collected in the second month following sale. The remaining 4% is uncollectible. | |
c. | Purchases of inventory will total $25,000 for September. Thirty 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 $17,000, all of which will be paid in September. |
d. | Selling and administrative expenses are budgeted at $15,000 for September. Of this amount, $4,000 is for depreciation. |
e. | Equipment costing $16,000 will be purchased for cash during September, and dividends totaling $4,000 will be paid during the month. |
f. | The company maintains a minimum cash balance of $7,000. An open line of credit is available from the company's bank to bolster the cash balance as needed. |
Required: | |
1. | Prepare a schedule of expected cash collections for September. 2. Prepare a schedule of expected cash disbursements for inventory purchases for September. 3. Prepare a cash budget for September. Indicate in the financing section any borrowing that will be needed during September. Assume that any interest will not be paid until the following month. |
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