Required: 1. Calculate the expected cash collections for December. 2. Calculate the expected cash disbursements for merchandise purchases for December. 3. Prepare a cash budget for December. Indicate in the financing section any borrowing that will be needed during the month. Assume that any interest will not be paid until the following month.
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Problem 8-21 (Algo) Schedules of Expected Cash Collections and Disbursements [LO8-2, LO8-4, LO8-8]
You have been asked to prepare a December
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The cash balance on December 1 is $56,600.
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Actual sales for October and November and expected sales for December are as follows:
| October | November | December | |
|---|---|---|---|
| Cash sales | $ 71,200 | $ 73,400 | $ 86,200 |
| Sales on account | $ 440,000 | $ 576,000 | $ 639,000 |
Sales on account are collected over a three-month period as follows: 20% collected in the month of sale, 60% collected in the month following sale, and 18% collected in the second month following sale. The remaining 2% is uncollectible.
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Purchases of inventory will total $315,000 for December. Thirty percent of a month’s inventory purchases are paid during the month of purchase. The accounts payable remaining from November’s inventory purchases total $181,500, all of which will be paid in December.
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Selling and administrative expenses are budgeted at $522,000 for December. Of this amount, $74,100 is for
depreciation. -
A new web server for the Marketing Department costing $103,500 will be purchased for cash during December, and dividends totaling $10,000 will be paid during the month.
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The company maintains a minimum cash balance of $20,000. An open line of credit is available from the company’s bank to increase its cash balance as needed.
Required:
1. Calculate the expected cash collections for December.
2. Calculate the expected cash disbursements for merchandise purchases for December.
3. Prepare a cash budget for December. Indicate in the financing section any borrowing that will be needed during the month. Assume that any interest will not be paid until the following month.
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