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Barnum Distributors wants a projection of cash receipts and cash payments for the month of November. On November 28, a note will be payable in the amount of $98,500, including interest. The cash balance on November 1 is $29,600. Accounts payable to merchandise creditors at the end of October were $217,000. |
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The company’s experience indicates that 70 percent of sales will be collected during the month of sale, 20 percent in the month following the sale, and 7 percent in the second month following the sale; 3 percent will be uncollectible. The company sells various products at an average price of $11 per unit. Selected sales figures are as follows: |
| Units | |
| Sept.%u2212actual | 40,000 |
| Oct.%u2212actual | 60,000 |
| Nov.%u2212estimated | 80,000 |
| Dec.%u2212estimated | 50,000 |
| Total estimated for the current year | 800,000 |
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Because purchases are payable within 15 days, approximately 50 percent of the purchases in a given month are paid in the following month. The average cost of units purchased is $7 per unit. Inventories at the end of each month are maintained at a level of 2,000 units plus 10 percent of the number of units that will be sold in the following month. The inventory on October 1 amounted to 8,000 units. |
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Budgeted operating expenses for November are $220,000. Of this amount, $90,000 is considered fixed (including depreciation of $35,000). All operating expenses, other than depreciation, are paid in the month in which they are incurred. |
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The company expects to sell fully depreciated equipment in November for $8,400 cash. |
| Instructions |
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Prepare a cash budget for the month of November, supported by schedules of cash collections on accounts receivable and cash payments for purchases of merchandise. (Omit the “$” sign in your response.) |
| BARNUM DISTRIBUTORS Cash Budget For the Month Ended November 30, 20__ |
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| (Click to select) Collections on receivables Cash balance at end of month Payment on note payable Sale of fully depreciated equipment Cash balance at beginning of month | $ | |
| Receipts: | ||
| (Click to select) Cash balance at end of month Cash balance at beginning of month Payment on note payable Collections on receivables Sale of fully depreciated equipment | $ | |
| (Click to select) Cash balance at beginning of month Collections on receivables Payment on note payable Cash balance at end of month Sale of fully depreciated equipment | ||
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| Total cash available | $ | |
| Payments: | ||
| (Click to select) Payments on operating expenses Sale of fully depreciated equipment Payment on note payable Collections on receivables Payments for purchases of merchandise | $ | |
| (Click to select) Sale of fully depreciated equipment Collections on receivables Payment on note payable Payments on operating expenses Payments for purchases of merchandise | ||
| (Click to select) Payments for purchases of merchandise Collections on receivables Payment on note payable Payments on operating expenses Sale of fully depreciated equipment | ||
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| (Click to select) Collections on receivables Cash balance at end of month Payments on operating expenses Payment on note payable Cash balance at beginning of month | $ | |