Question

The following information is from White Mountain Furniture Showroom’s financial records.

Month	Sales			Purchases
July	$	75,000		$	48,000
August		75,000			47,000
September		68,000			35,000
October		72,000			53,000

Collections from customers are normally 66 percent in the month of sale, 16 percent in the month following the sale, and 16 percent in the second month following the sale. The balance is expected to be uncollectible. All purchases are on account. Management takes full advantage of the 2 percent discount allowed on purchases paid for by the tenth of the following month. Purchases for November are budgeted at $67,000, and sales for November are forecasted at $73,000. Cash disbursements for expenses are expected to be $14,400 for the month of November. The company’s cash balance on November 1 was $37,000.

Required:

1.	Prepare the schedule for expected cash collections during November.

2.	Prepare the schedule for expected cash disbursements during November.

3.	Prepare the schedule for expected cash balance on November 30.

     

Answer 1

Schedule for Expected Cash Collections during November
66% of November Sales	48,180
16% of October Sales	11,520
16% of September Sales	10,880
Expected Cash collections during Nov	70,580
Schedule for Expected Cash Disbursements during November
October Purchases	53,000
Less: 2% Discount	1,060
Expected Payments	51,940
Schedule for Expected cash balance
Beginning Cash Balance	37,000
Add: Collections during Nov	70,580
Total cash available	107,580
Less: Cash disbursements
Payment for Purchases	51,940
Expenses	14,400
Total disbursements	66,340
Ending Cash Balance	41,240