Cash budgeting, chapter appendix. On December 1, 2009, the Itami Wholesale Co. is attempting to project cash receipts and disbursements through January 31, 2010. On this latter date, a note will be payable in the amount of $100,000. This amount was borrowed in September to carry the company through the seasonal peak in November and December.

Selected general ledger balances on December 1 are:

Sales terms call for a 2% discount if payment is made within the first 10 days of the month after sale, with the balance due by the end of the month after sale. Experience has shown that 70% of the billings will be collected within the discount period, 20% by the end of the month after purchase, and 8% in the following month. The remaining 2% will be uncollectible. There are no cash sales. The average selling price of the company’s products is $100 per unit Actual and projected sales are:

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 $70. 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 $400,000. Of this amount, $150,000 are considered fixed (and include depreciation of $30,000). The remainder vary with sales. Both fixed and variable marketing, distribution, and customer-service costs are paid as incurred. Prepare a cash budget for December 2009 and January 2010. Supply supporting schedules for collections of receivables; payments for merchandise; and marketing, distribution, and customer-service costs. 

Cash Accounts receivable Allowance for bad debts Inventory $ 10,000 280,000 $15,800 87,500 Accounts payable 92,000