Randall
Company is a merchandising company that sells a single product. The company's
inventories, production, and sales in units for the next three months have been
forecasted as follows:
Units are sold for $12 each. One fourth of all sales are paid for in the month
of sale and the balance are paid for in the following month. Accounts
receivable at September 30 totaled $450,000.
Merchandise is purchased for $7 per unit. Half of the purchases are paid for in
the month of the purchase and the remainder are paid for in the month following
purchase. Selling and administrative expenses are expected to total $120,000
each month. One half of these expenses will be paid in the month in which they are
incurred and the balance will be paid in the following month. There is no
depreciation. Accounts payable at September 30 totaled $290,000.
Cash at September 30 totaled $80,000. A payment of $300,000 for purchase of
equipment is scheduled for November, and a dividend of $200,000 is to be paid
in December.
Required:
a. Prepare a schedule of expected cash collections for each of the months of
October, November, and December.
b. Prepare a schedule showing expected cash disbursements for merchandise
purchases and selling and administrative expenses for each of the months
October, November, and December.
c. Prepare a cash budget for each of the months October, November, and
December. There is no minimum required ending cash balance.
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