On December 1, 2013, the Itami Wholesale Company is attempting to project cash receipts and disbursements through January 31, 2014. On January 31, 2014, a note will be payable in the amount of $120,000. This amount was borrowed in September to carry the company through the seasonal peak in November and December.
The trial balance on December 1 shows in part the following information:
Sales terms call for a 2% discount if payment is made within the first ten days of the month after purchase; after that, the full amount is due by the end of the month after purchase. Experience has shown that 70% of the billings will be collected within the discount period, 20% by the end of the month after purchase, 8% in the following month, and 2% will be uncollectible. There are no cash sales.
The average selling price of the company’s products is $120 per unit. Actual and projected sales are as follows:
October actual ................ $ 216,000
November actual ............... 300,000
December estimated ............. 360,000
January estimated .............. 180,000
February estimated .............. 144,000
Total estimated for year ended June 30, 2014 ... 1,800,000
All purchases are payable within 15 days. Thus, approximately 50% of the purchases in a month are due and payable in the next month. The average unit purchase cost is $84. Target ending inventories are 500 units plus 25% of the next month’s unit sales.
Total budgeted marketing, distribution, and customer service costs for the year are $480,000. Of this amount, $180,000 is considered fixed (and includes amortization of $36,000). The remainder varies with sales. Both fixed and variable marketing, distribution, and customer service costs are paid as incurred.
Prepare a cash budget for December and January. Supply supporting schedules for collections of receivables, payments for merchandise, and marketing, distribution, and customer-service costs. Will there be enough cash available on January 31, 2014 to repay the $120,000 note?

  • CreatedJuly 31, 2015
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