Question

Randall Company is a merchandising company that sells a single product. The company's inventories, production, and sales in units for the next three months have been forecasted as follows:

	October	November	December
Beginning Inventory	10,000	10,000	10,000
Merchandise purchases	60,000	70,000	35,000
Sales	60,000	70,000	40,000
Ending Inventory	10,000	10,000	5,000

a. Units are sold for $12 each. One fourth of all sales are paid for in the month of sale and the balance is paid for in the following month. Accounts receivable at September 30 totaled $450,000.
Required: Prepare a sales budget and cash collection schedule

b. Merchandise is purchased for $7 per unit. Half of the purchases are paid for in the month of the purchase and the remainder is paid for in the month following purchase. Selling and administrative expenses are expected to total $120,000 each month. One half of these expenses will be paid in the month in which they are incurred, and the balance will be paid in the following month. There is no depreciation. Accounts payable at September 30 totaled $290,000.
Required: Prepare a schedule showing expected cash disbursements for merchandise purchases and selling and administrative expenses for each of the months October, November, and December.

c. Cash at September 30 totaled $80,000. A payment of $300,000 for purchase of equipment is scheduled for November, and a dividend of $200,000 is to be paid in December.
Required: Prepare a cash budget for each of the months October, November, and December. There is no minimum required ending cash balance.

Answer 1

1. Sales Budget -

2. Cash Collection Schedule -

3. Schedule Showing Expected Cash Disbursements for Merchandise Purchases -

4. Schedule Showing Expected Cash Disbursements for Selling and Administrative Expenses -

5. Cash Budget -

6.Working Notes -