Question

impco, a retailer, makes both cash and credit sales (i.e., sales on open account). Information regarding budgeted sales for the last quarter of the year is as follows: October November December Cash sales $ 140,000 $ 115,000 $ 105,000 Credit sales 140,000 138,000 115,500 Total $ 280,000 $ 253,000 $ 220,500 Past experience shows that 5% of credit sales are uncollectible. Of the credit sales that are collectible, 60% are collected in the month of sale; the remaining 40% are collected in the month following the month of sale. Customers are granted a 1.5% discount for payment within 10 days of billing. Approximately 75% of collectible credit sales take advantage of the cash discount. Inventory purchases each month are 100% of the cost of the following month’s projected sales. (The gross profit rate for Timpco is approximately 30%.) All merchandise purchases are made on credit, with 20% paid in the month of purchase and the remainder paid in the following month. No cash discounts for early payment are in effect. Required: 1. Calculate the budgeted total cash receipts for November and December. (Round your intermediate calculations and final answers to the nearest whole dollar amount.) 2. Calculate budgeted cash disbursements for November and December (budgeted total sales for January of the coming year equals $205,000).

	November December 1. Total cash receipts 2. Budgeted cash disbursements

Answer 1

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			October	November	December
Cash Sale	A		$140,000	$   115,000	$   105,000
Credit Sale	B		$140,000	$   138,000	$   115,500
Collectible Credit Sale	B*95%=C	95%	$133,000	$   131,100	$   109,725
Discount Benefit	D=C*75%		$ 99,750	$     98,325	$     82,294
No Discount	E=C*25%		$ 33,250	$     32,775	$     27,431
1. Budgeted Total Cash Receipts
				November	December
Collection of Credit Sale without discount
October Sale	40% of 33250			$     13,300
November Sale	60 and 40% of 32775			$     19,665	$     13,110
December Sale	60% of 27431				$     16,459
Collection of Credit Sale after Discount
October Sale	40%*98.5%*99750			$     39,302
November Sale	40%*98.5%*98325 and 60%*98.5%*98325			$     58,110	$     38,740
December Sale	60%*98.5%*82294				$     48,636
Cash Sale	98.5% will be collected after discount			$   113,275	$   103,425
Budgeted Total Cash Receipts				$   243,652	$   220,369
2. Budgeted Cash Disbrusment
			October	November	December	January
Cost of Goods Sold	70% of Sale		$196,000	$   177,100	$   154,350	$143,500
Purchases	100% of Next Month COGS		$177,100	$   154,350	$   143,500
Payment pattern:
October Purchase Payment	80% of October Purchase	A		$   141,680
November Purchase Payment	20% and 80% of November Purchase	B		$     30,870	$   123,480
December Purchase Payment	20% of December Purchase	C			$     28,700
Budgeted Cash Disbursment		A+B+C		$   172,550	$   152,180