Graham Potato Company has projected sales of $20,400 in September, $22,000 in October, $30,400 in November,...

Graham Potato Company has projected sales of $20,400 in September, $22,000 in October, $30,400 in November, and $26,400 in December. Of the company's sales, 30 percent are paid for by cash and 70 percent are sold on credit. Experience shows that 40 percent of accounts receivable are paid in the month after the sale, while the remaining 60 percent are paid two months after. Determine collections for November and December.

Also assume Graham’s cash payments for November and December are $25,500 and $18,000, respectively. The beginning cash balance in November is $5,000, which is the desired minimum balance.

a. Prepare a cash receipts schedule for November and December.

b. Prepare a cash budget with borrowing needed or repayments for November and December. (Negative amounts should be indicated by a minus sign. Assume the November beginning loan balance is $0.)

Solutions

Expert Solution

Statement of cash and credit sales

Sl.no	Particulars	September	October	November	December
a	Sales	20,400	22,000	30,400	26,400
b	Credit sales(70%)	14,280	15,400	21,280	18,480
c	Cash sales (30%)	6120	6,600	9120	7920

Statement of collection of account receivables in the months of November and December:-

Particulars	November	December
Collection in a month after sale (40%)	6160(15400@40%)	8512(21,280@40%)
Collection two months after sale(60%)	8568(14280× 60%)	9240(15,400@60%)
Total collection	14,728	17,752

. a)CASH RECEIPTS SCHEDULE FOR THE MONTHS OF NOVEMBER & DECEMBER.

Particulars	November	December
Cash sales	9120	7920
Collection of account receivables	14,728	17752
Total cash receipts	23,848	25,672

b)cash budget for the month of November & December

Sl.no	particulars	November	December
a	cash receipts	23,848	25,672
b	cash payments	(25,500)	(18,000)
c	net cash flow	(1652)	7672
d	Beginning cash balance	5000	5000
e	cumulative cash balance	3348	12,672
f	monthly loan or (repayment)	1652	(1652)
g	cumulative loan balance	1652	-0-
h	ending cash balance (e+g)	5000	11,020

jeff jeffy answered 1 month ago

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