Question
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 $9,000.
b. Actual sales for July and August and expected sales for September are as follows:
July August September
Sales on Account 26500 35250 47400
Sales on account are collected over a three-month period as follows: 10% collected in the
month of sale, 70% collected in the month following sale, and 18% collected in the second
month following sale. The remaining 2% is uncollectible.
c. Purchases of inventory will total $25,000 for September. Twenty 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 $16,000, all of which will be paid in September.
d. Selling and administrative expenses are budgeted at $13,000 for September. Of this amount,
$4,000 is for depreciation.
e. Equipment costing $18,000 will be purchased for cash during September, and dividends totaling
$3,000 will be paid during the month.
f. The company maintains a minimum cash balance of $5,000. 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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