coulson industries has gathered the following data needed for the preparation of a c 681267

Coulson Industries has gathered the following data needed for the preparation of a cash disbursements schedule for October, November, and December.

Purchases The firm’s purchases represent 70% of sales. Of this amount, 10% is paid in cash, 70% is paid in the month immediately following the month of purchase, and the remaining 20% is paid 2 months following the month of purchase.⁶

Rent payments Rent of $5,000 will be paid each month.

Wages and salaries Fixed salary cost for the year is $96,000, or $8,000 per month. In addition, wages are estimated as 10% of monthly sales.

Tax payments Taxes of $25,000 must be paid in December.

Fixed asset outlays New machinery costing $130,000 will be purchased and paid for in November.

Interest payments An interest payment of $10,000 is due in December.

Cash dividend payments Cash dividends of $20,000 will be paid in October.

Principal payments (loans) A$20,000 principal payment is due in December.

Repurchases or retirements of stock No repurchase or retirement of stock is expected between October and December. The firm’s cash disbursements schedule, using the preceding data, is shown in Table 3.9. Some items in the table are explained in greater detail below.

Purchases This entry is merely informational. The figures represent 70% of the forecast sales for each month. They have been included to facilitate calculation of the cash purchases and related payments.

Cash purchases The cash purchases for each month represent 10% of the month’s purchases.

Payments of A/P These entries represent the payment of accounts payable (A/P) resulting from purchases in earlier months.

Lagged 1 month These figures represent purchases made in the preceding month that are paid for in the current month. Because 70% of the firm’s purchases are paid for 1 month later, the payments with a 1 month lag shown for September represent 70% of the August purchases, payments for October represent 70% of September purchases, and so on.

Lagged 2 months These figures represent purchases made 2 months earlier that are paid for in the current month. Because 20% of the firm’s purchases are paid for 2 months later, the payments with a 2 month lag for October represent 20% of the August purchases, and so on.

Wages and salaries These amounts were obtained by adding $8,000 to 10% of the sales in each month. The $8,000 represents the salary component; the rest represents wages. The remaining items on the cash disbursements schedule are self explanatory.