Sophisticates, Inc., a distributor of jewelry throughout California, is in the process of assembling a cash budget for the first
All sales are on account. Sixty percent of customer accounts are collected in the month of sale; 35 percent are collected in the following month. Uncollectibles amounting to 5 percent of sales are anticipated, and management believes that only 20 percent of the accounts outstanding on December 31, 20x0, will be recovered and that the recovery will be in January 20x1.
Seventy percent of the merchandise purchases are paid for in the month of purchase; the remaining 30 percent are paid for in the month after acquisition.
The December 31, 20x0, balance sheet disclosed the following selected figures: cash, $ 60,000; accounts receivable, $ 165,000; and accounts payable, $ 66,000.
Sophisticates, Inc., maintains a $ 60,000 minimum cash balance at all times. Financing is available (and retired) in $ 1,000 multiples at an 8 percent interest rate, with borrowings taking place at the beginning of the month and repayments occurring at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid at that time.
1. Prepare a schedule that discloses the firms total cash collections for January through March.
2. Prepare a schedule that discloses the firms total cash disbursements for January through March.
3. Prepare a schedule that discloses the firms cash needs, if any, for January through March. The schedule should present the following information in the order cited: Beginning cash balance, total receipts (from requirement 1), total payments ( from requirement 2), the cash excess (deficiency) before financing, borrowing needed to maintain minimum balance, loan principal repaid, loan interest paid, and ending cashbalance.
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Cash Budget
A cash budget is an estimation of the cash flows for a business over a specific period of time. These cash inflows and outflows include revenues collected, expenses paid, and loans receipts and payment. Its primary purpose is to provide the...
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