CASH BUDGET; REQUIRED:   Prepare a schedule showing cash collections during October. Prepare cash disbursements (payments) during October. Assuming that company had $150,000 cash balance as of October 1, calculate cash balance as of October 31.   Company’s accounts receivable collection experience is as follows:             Cash collected from current month’s sales; terms 1/10 n/30:                  20%             Cash collected from prior month’s sales (no discount)                            65%             Cash collected from sales two months ago:                                            13%             Uncollectible receivables                                                                         2%   Company’s estimated credit sales (company has no cash sales):               July                  $480,000             August                420,000             September         370,000             October              350,000             November          400,000   Company’s monthly variable costs, paid as incurred, equal 60% of monthly sales.  Monthly fixed expenses are: $80,000 (Rent Expense : $20,000;  Salaries Expense: $30,000;  Depreciation Exp.: $18,000;  Advertising Expense: $8,000;  Depletion Expense: $4,000)                                                                                                   October cash collections: $_____________________                                                                                                   October cash disbursements: $__________________                                                                                                   October 31 cash balance: $_____________________

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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CASH BUDGET; REQUIRED:

 

  1. Prepare a schedule showing cash collections during October.
  2. Prepare cash disbursements (payments) during October.
  3. Assuming that company had $150,000 cash balance as of October 1, calculate cash balance as of October 31.

 

Company’s accounts receivable collection experience is as follows:

            Cash collected from current month’s sales; terms 1/10 n/30:                  20%

            Cash collected from prior month’s sales (no discount)                            65%

            Cash collected from sales two months ago:                                            13%

            Uncollectible receivables                                                                         2%

 

Company’s estimated credit sales (company has no cash sales):

 

            July                  $480,000

            August                420,000

            September         370,000

            October              350,000

            November          400,000

 

Company’s monthly variable costs, paid as incurred, equal 60% of monthly sales.  Monthly fixed expenses are: $80,000 (Rent Expense : $20,000;  Salaries Expense: $30,000;  Depreciation Exp.: $18,000;  Advertising Expense: $8,000;  Depletion Expense: $4,000)

 

                                                                                                October cash collections: $_____________________

 

                                                                                                October cash disbursements: $__________________

 

                                                                                                October 31 cash balance: $_____________________

Expert Solution
Step 1 Introduction

Cash collection and cash disbursements includes the transactions that are made in cash only . It will not include depreciation expense or depletion expenses.

Step 2 Calculation

1.        

               Schedule showing cash collections

                                   during October

Particulars

Amt ($)

Account receivable from current month’s sales

                 (20 % of 350,000)

 

70,000

Account receivable from September month’s sales

                  (65% of 370,000)           

 

240,500

Account receivable from August month’s sales

                 (13% of 420,000)

 

54,600

Total  Account receivable

365,100

Less: Uncollectible receivables

                  (2% of 365,100)

 

7,302

         Net cash collections in October

357,798

 

  1.  

                   Schedule showing cash disbursements

                                   during October

Particulars

Amount ($)

Variable costs  (60% of 350,000)

210,000

Fixed expenses

 

Rent

20,000

Salaries

30,000

Advertising

8,000

Total cash disbursements

268,000

 

3.

                                         Cash balance

                                     as on October 31

Particulars

Amount ($)

Cash balance as on October 1

150,000

Net cash collections during October

357,798

Total cash

507,798

Cash disbursement during October

268,000

Net cash balance on October 31

239,798

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