Question

Justin Company is in the process of preparing its budget for next year. Cost of goods sold has been estimated at 60 percent of sales. Merchandise purchases are to be made during the month preceding the month of the sales. Button pays 60 percent in the month of purchase and 40 percent in the month following. Wages are estimated at 20 percent of sales and are paid during the month of sale. Other operating costs amounting to 10 percent of sales are to be paid in the month following the sale.

Month                          Sales Revenue

December                     $170,000

January                         250,000

February                       120,000

March                          200,000

April                            160,000

Prepare a schedule of cash disbursements for January, February, and March

Answer 1

	January	February	March	April
Cash paid for Accounts payable
Cost of goods sold	$250,000*60% = $150,000	$120,000*60% = $72,000	$200,000*60% = $120,000	$160,000*60% = $96,000
Budgeted purchases	$                                      72,000	$                                 120,000	$                                      96,000
Paid for December purchase	$150,000*40% = $60,000
Paid for January purchase	$72,000*60% = $43,200	$72,000*40% = $28,800
Paid for February purchase		$120,000*60% = $72,000	$120,000*40% = $48,000
Paid for March purchase			$96,000*60% = $57,600
Total cash paid	$                                   103,200	$                                 100,800	$                                   105,600

Schedule of cash disbursments
	January	February	March
Cash paid for Accounts payable	$                              103,200	$                              100,800	$                              105,600
Cash paid for Wages	$250,000*20% = $50,000	$120,000*20% = $24,000	$200,000*20% = $40,000
Cash paid for other operating expenses	$170,000*10% = $17,000	$250,000*10% = $25,000	$120,000*10% = $12,000
Total cash disbursments	$                              170,200	$                              149,800	$                              157,600