On December 1, 2011, the Itami Wholesale Co. is attempting to project cash receipts anddisbursements through January 31, 2012. On this latter date, a note will be payable in theamount of $100,000. This amount was borrowed in September to carry the companythrough the seasonal peak in November and December. Selected general ledger balanceson December 1 are as follows:Cash$ 88,000InventoryAccounts payable65,200136,000Sales terms call for a 3% discount if payment is made within the first 10 days of the monthafter sale, with the balance due by the end of the month after sale. Experience has shownthat 50% of the billings will be collected within the discount period, 30% by the end of themonth after purchase, and 14% in the following month. The remaining 6% will beuncollectible. There are no cash sales. The average selling price of the company'sproducts is $100 per unit.Actual and projected sales are as follows:October actual$ 280,000320,000330,000November actualDecember estimatedJanuary estimatedFebruary estimated250,000240,000Total estimated for year ending June 30, 2012 $2,400,000All purchases are payable within 15 days. Approximately 60% of the purchases in a monthare paid that month, and the rest the following month. The average unit purchase cost is$80. Target ending inventories are 500 units plus 10% of the next month's unit sales.Total budgeted marketing, distribution, and customer-service costs for the year are$600,000. Of this amount, $120,000 are considered fixed (and include depreciation of$30,000). The remainder varies with sales. Both fixed and variable marketing, distribution,and customer-service costs are paid as incurred.Prepare a cash budget for December 2011 and January 2012. Supply supporting schedulesfor collections of receivables; payments for merchandise; and marketing, distribution, andcustomer-service costs.

Budgeting is an important part of the business process. Without budgeting a business cannot track…

On December 1, 2011, the Itami Wholesale Co. is attempting to project cash receipts and disbursements through January 31, 2012. On this latter date, a note will be payable in the amount of $100,000. This amount was borrowed in September to carry the company through the seasonal peak in November and December. Selected general ledger balances on December 1 are as follows: Cash $ 88,000 Inventory Accounts payable 65,200 136,000 Sales terms call for a 3% discount if payment is made within the first 10 days of the month after sale, with the balance due by the end of the month after sale. Experience has shown that 50% of the billings will be collected within the discount period, 30% by the end of the month after purchase, and 14% in the following month. The remaining 6% will be uncollectible. There are no cash sales. The average selling price of the company's products is $100 per unit. Actual and projected sales are as follows: October actual $ 280,000 November actual 320,000 December estimated 330,000 January estimated February estimated 250,000 240,000 Total estimated for year ending June 30, 2012 $2,400,000 All purchases are payable within 15 days. Approximately 60% of the purchases in a month are paid that month, and the rest the following month. The average unit purchase cost is $80. Target ending inventories are 500 units plus 10% of the next month's unit sales. Total budgeted marketing, distribution, and customer-service costs for the year are $600,000. Of this amount, $120,000 are considered fixed (and include depreciation of $30,000). The remainder varies with sales. Both fixed and variable marketing, distribution, and customer-service costs are paid as incurred. Prepare a cash budget for December 2011 and January 2012. Supply supporting schedules for collections of receivables; payments for merchandise; and marketing, distribution, and customer-service costs.

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q