Reference no: EM131336000
Cash Budget Extra Credit
Rahman Products, a distributor of organic beverages, needs a cash budget for December.
The following information is available:
a. The cash balance at the beginning of December $12,000.
b. Actual sales for October and November and expected sales for June are as follows:
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October
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November
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December
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Cash Sales
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$ 7,500
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$ 6,250
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$ 6,000
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Sales on account
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20,000
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32,000
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40,000
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Total Sales
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$26,500
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$35,250
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$47,400
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Sales on account are collected over a three-month period in the following ratio:
10% collected in the month sale, 70% collected in the month following sale, and
18% collected in the second month following sale. The remaining 2% is uncollectible.
c. Purchases of inventory will total $25,000 for December. Twenty percent of a month's inventory purchases are paid for during the month of purchase. The accounts payable remaining from November's inventory purchases total $16,000, all of which will be paid in December.
d. Selling and administrative expenses are budgeted at $13,000 for December. Of this amount, $4,000 is for depreciation. Purchase of a copier in December for $4,000.
e. Equipment costing $18,000 will be purchased for cash during December, and dividends totaling $3,000 will be paid during the month. Sale of old assets in December for $1,000.
f. The company must maintain a minimum cash balance of $6,000. An open line of credit is available from the company's bank to bolster the cash position as needed.
Required:
1. Prepare a cash budget for December. Indicate in the financing section any borrowing that will be needed during December.
2. Prepare a schedule of expected cash collections for December.
3. Prepare a schedule of expected cash disbursement for December.
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