PROBLEM 7–16B Schedules of Expected Cash Collections and Disbursements [LO2, LO4, LO8]
CHECK FIGURE
(3) Ending cash balance: $8,800
Ojai 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 $12,800.
b. Actual sales for July and August and expected sales for September are as follows:
|
|
July
|
August
|
September
|
|
Cash sales
|
$ 6,100
|
$ 4,100
|
$ 9,500
|
|
Sales on account
|
21,000
|
26,000
|
37,000
|
|
Total sales
|
27,100
|
30,100
|
46,500
|
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 21% collected in the second month following sale. The remaining 4% is uncollectible.
c. Purchases of inventory will total $25,000 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 $16,000, all of which will be paid in September.
d. Selling and administrative expenses are budgeted at $14,000 for September. Of this amount, $4,000 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 $8,800. An open line of credit is available from the company’s bank to bolster the cash balance as needed.
Required:
1.,
2. Prepare a schedule of expected cash disbursements for inventory purchases for September.
3. Prepare a cash budget for September. Indicate in the financing section any borrowing that will be needed during September. Assume that any interest will not be paid until the following month.