Question
Study Problem #22-6A in your homework and answer the following questions in your own words. YOU ARE NOT BEING ASKED TO PREPARE A REVISED BUDGET;
Study Problem #22-6A in your homework and answer the following questions in your own words. YOU ARE NOT BEING ASKED TO PREPARE A REVISED BUDGET; INSTEAD, ANSWER THE QUESTIONS BASED ON CONCEPT AND YOUR UNDERSTANDING OF HOW THE BUDGET NUMBERS ARE INTERRELATED. ASSUME EACH OF THE FOLLOWING QUESTIONS IS AN INDEPENDENT SITUATION:
a. What would be the impact on the cash budget if 30% (instead of 25%) of credit sales is collected in the month of the sale? (Note this is the only change).
b. What would be the impact on the cash budget, if 90% (instead of 80%) of the merchandise is paid in the month following the purchase?
Problem 22-6A (50 minutes)
| ONEIDA COMPANY | |||||
| Cash Budget | |||||
| For September, October, and November | |||||
| September | October | November | |||
| Beginning balance............................... | $ 5,000 | $ 99,250 | $ 69,500 | ||
| Cash receipts |
|
|
| ||
| Collection on accounts receivable*.... | 159,250 | 249,250 | 338,100 | ||
| Receipts from bank loan..................... | 100,000 | _______ | _______ | ||
| Total cash available............................. | 264,250 | 348,500 | 407,600 | ||
| Cash disbursements | |||||
| Payments on accounts payable**........ | 100,000 | 217,000 | 228,000 | ||
| Payroll................................................ | 20,000 | 22,000 | 24,000 | ||
| Rent.................................................... | 10,000 | 10,000 | 10,000 | ||
| Other expenses................................... | 35,000 | 30,000 | 20,000 | ||
| Repayment on bank loan.................... |
|
| 100,000 | ||
| Interest on bank loan***...................... | ________ | ________ | 3,000 | ||
| Total cash disbursements................... | 165,000 | 279,000 | 385,000 | ||
| Ending cash balance............................ | $ 99,250 | $ 69,500 | $ 22,600 | ||
*** Interest at 12% on $100,000 for 3 months is $3,000.
Supporting schedules
| Collections of credit sales* | August | September | October | November |
| Aug. sales ($215,000)[25%: 45%: 20%: 9%]......... | $ 53,750 | $ 96,750 | $ 43,000 | $ 19,350 |
| Sept. sales ($250,000)[25%: 45%: 20%]............... | - | 62,500 | 112,500 | 50,000 |
| Oct. sales ($375,000)[25%: 45%].......................... | - | - | 93,750 | 168,750 |
| Nov. sales ($400,000)[25%]................................... | - | - | - | 100,000 |
| Total............................................................................ | $ 53,750 | $159,250 | $249,250 | $338,100 |
| Payments on credit purchases** | August | September | October | November |
| Aug. purchases ($125,000)(0%: 80%: 20%)................................ | $ 0 | $100,000 | $ 25,000 | $ - |
| Sept. purchases ($240,000)(0%: 80%: 20%)............................... | - | 0 | 192,000 | 48,000 |
| Oct. purchases ($225,000)(0%: 80%)........................................... | - | - | 0 | 180,000 |
| Nov. purchases ($200,000)(0%)................................................... | - | - | - | 0 |
| Total.................................................................................................... | $ 0 | $100,000 | $217,000 | $228,000 |
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