Question
Charlie Co. has planned the following sales and purchases for the next three months: January February March Budgeted Sales $40,000 $50,000 $70,000 Budgeted purchase of
Charlie Co. has planned the following sales and purchases for the next three months: | ||||||||||||
Customers pay 20% of the sales in cash at the time of the transaction and 80% on account. From experience, the company has learned that a month's sales on account are collected according to the following pattern: | ||||||||||||
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The company pays 45% of the cost of the inventory in the month of purchase, and 55% during the following month. | ||||||||||||
The company requires a minimum cash balance of $5,000 to start a month. The beginning cash balance in March is budgeted to be $6,000. | ||||||||||||
The following additional information has been provided for March: | ||||||||||||
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The operating expenses include $5,000 depreciation. All operating expenses are paid during each month. | ||||||||||||
Required: a. Calculate the budgeted cash collection for March. | ||||||||||||
b. Calculate the balance of accounts payable at the end of March. c. Prepare a cash budget in good form for the month of March (The company can borrow in any dollar amount and will not pay interest until April) |
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