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ACCT 386 - Week 5 - Homework - Question 4

ACCT 386 - Week 5 - Homework - Question 4
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ACCT 386 - Week 5 - Homework - Question 4

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Question 4

Calgon Products, a distributor of organic beverages, needs a cash budget for September. The following information is available:

a.

The cash balance at the beginning of September is $11,800.

b.

Actual sales for July and August and expected sales for September are as follows:

 

July

August

September

  Cash sales

$

5,200   

$

4,900   

$

7,500   

  Sales on account

 

20,000   

 

30,000   

 

37,000   

 







  Total sales

$

 25,200  

$

34,900   

$

44,500   

 














 

Sales on account are collected over a three-month period as follows: 10% collected in the month of sale, 65% collected in the month following sale, and 23% collected in the second month following sale. The remaining 2% is uncollectible.

c.

Purchases of inventory will total $20,000 for September. Thirty percent of a month's inventory purchases are paid for during the month of purchase. The accounts payable remaining from August's inventory purchases total $15,000, all of which will be paid in September.

d.

Selling and administrative expenses are budgeted at $13,000 for September. Of this amount, $5,000 is for depreciation.

e.

Equipment costing $18,000 will be purchased for cash during September, and dividends totaling $4,000 will be paid during the month.

f.

The company maintains a minimum cash balance of $7,800. An open line of credit is available from the company's bank to bolster the cash balance as needed.