Thursday, 2 August 2012

Calgon Products, a distributor of organic beverages, needs a cash budget for September. The

Calgon Products, a distributor of organic beverages, needs a cash budget for September. The following information is available:

a. The cash balance at the beginning of September is $9,000.
b. Actual sales for July and August and expected sales for September are as follows:

July August September
  Cash sales $ 6,500    $ 5,250    $ 7,400   
  Sales on account 20,000    30,000    40,000   






  Total sales $ 26,500    $ 35,250    $ 47,400   













   
Sales on account are collected over a three-month period as follows: 10% collected in the month of 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 September. Twenty percent of a month's inventory purchases are paid for during the month of purchase. The accounts payable remaining from August's inventory purchases total $16,000, all of which will be paid in September.
d. Selling and administrative expenses are budgeted at $13,000 for September. Of this amount, $4,000 is for depreciation.
e. Equipment costing $18,000 will be purchased for cash during September, and dividends totaling $3,000 will be paid during the month.
f. The company maintains a minimum cash balance of $5,000. An open line of credit is available from the company's bank to bolster the cash balance as needed.
   
Required:
1. Prepare a schedule of expected cash collections for September. (Do not round intermediate calculations. Omit the "$" sign in your response.)

Schedule of Expected Cash Collections
  September cash sales $ 7,400 correct  
  September collections on account:
      July sales 3,600 correct  
      August sales 21,000 correct  
      September sales 4,000 correct  

  Total cash collections $ 36,000 correct  



   
2.
Prepare a schedule of expected cash disbursements for inventory purchases for September. (Do not round intermediate calculations. Omit the "$" sign in your response.)
   
Schedule of Expected Cash Disbursements
  Payments to suppliers:
     August purchases $ 16,000 correct  
     September purchases 5,000 correct  

  Total cash payments $ 21,000 correct  



   
3.

Prepare a cash budget for September. Indicate in the financing section any borrowing that will be needed during September. Assume that any interest will not be paid until the following month. (Input all amounts as positive values except cash deficiency, repayments and interest which should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Calgon Products
Cash Budget
For the Month of September
  Cash balance, beginning $ 9,000 correct  
  Add cash receipts:
     Collections from customers 36,000 correct  

  Total cash available before current financing 45,000 correct  
  Less disbursements:
     Payments to suppliers for inventory $ 21,000 correct  
     Selling and administrative expenses 9,000 correct  
     Equipment purchases 18,000 correct  
     Dividends paid 3,000 correct  

  Total disbursements 51,000 correct  

  Excess (deficiency) of cash available over disbursements -6,000 correct  

  Financing:
     Borrowings 11,000 correct  
     Repayments 0 correct  
     Interest 0 correct  

  Total financing 11,000 correct  

  Cash balance, ending $ 5,000 correct