Question

The following information was available from ABC Company's financial records.

Sales Purchases April $90,000 $52,500 May $82,500 $60,000 June $75,000 $45,000 July $97,500 $67,500 August $82,500 $75,000

Collections from customers are as follows: Month of sale 75% One month following sale 20% Second month following sale 5%

On the purchase side, the Company takes full advantage of the 3 percent discount allowed on purchases paid for by the tenth of the following month. (Hint: April purchases are paid in full in May by taking advantage of the discount.)

Additional information for the month of August is as follows: Cash disbursements for administrative expenses $18,000 Amortization expenses $6,250 Cash balance on August 1 $27,500

a) Compute the cash collections for the month of August.

b) Compute the cash disbursements for the month of August.

c) Compute the cash balance on August 31.

d) Compute accounts receivable at August 31.

e) Compute accounts payable at August 31.

Answer 1

	Sales	Purchase
April	90000	52500
May	85200	60000
June	75000	45000
July	97500	67500
August	82500	75000

a) Compute the cash collections for the month of August.

Answer =

Sales Made in	August
June 5%	3750
July 20%	19500
August 75%	61875
cash collections for the month of August	85125

b) Compute the cash disbursements for the month of August.

For Merchandised Purchases in	August
July (with 3% discount)	65475
Total Merchandise Paid For	65475

c) Compute the cash balance on August 31.

	August
Beginning Cash Balance	27500
Budgeted Cash Receipts	85125
Total Cash Available	112625
Disbursements
Purchases	65475
Expenses	18000
Total Disbursements	83475
Ending Cash Balance August 31	29150

d) Compute accounts receivable at August 31.

Sales Made in	August
July 5%	4875
August 25%	20625
Accounts receivable at August 31	25500

e) Compute accounts payable at August 31.

75000