# Question: Barley Inc wants a projection of cash receipts and cash

Barley, Inc., 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 \$102,250, including interest. The cash balance on November 1 is \$37,200. Accounts payable to merchandise creditors at the end of October were \$206,000.
The company’s experience indicates that 70 percent of sales will be collected during the month of sale, 25 percent in the month following the sale, and 3 percent in the second month following the sale; 2 percent will be uncollectible. The company sells various products at an average price of \$10 per unit. Selected sales figures are as follows:
Units
Sept.—actual . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
Oct.—actual . . . . . . . . . . . . . . . . . . . . . . . . ... 70,000
Nov.—estimated . . . . . . . . . . . . . . . . . . . . . 90,000
Dec.—estimated . . . . . . . . . . . . . . . . . . . . . . 60,000
Total estimated for the current year . . . . . . . . . 900,000
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 \$6 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 9,000 units.
Budgeted operating expenses for November are \$225,000. Of this amount, \$100,000 is considered fixed (including depreciation of \$40,000). All operating expenses, other than depreciation, are paid in the month in which they are incurred.
The company expects to sell fully depreciated equipment in November for \$9,000 cash.

Instructions
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.

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