Question

Chilly Pepper, Inc. provided the following information: • Projected sales for July, $120,000; August, $195,000, September $165,000 • Projected merchandise purchases for August, $150,000; September $180,000 • Chilly Pepper estimates that it will collect 40% of its sales in the month of sale, 35% in the month after the sale, and 22% in the second month following the sale. Three percent of all sales are estimated to be bad debts. • Chilly Pepper pays 30% of merchandise purchases in the month purchased and 70% in the following month. • General operating expenses are budgeted to be $20,000 per month. Chilly Pepper pays operating expenses in the month incurred. • Chilly Pepper makes loan payments of $3,000 per month of which $400 is interest and the remainder is principal. • Chilly Pepper’s bank requires a minimum end of month cash balance of $10,000. If Chilly Pepper’s cash balance is less than $10,000, it borrows against its line of credit.

A. Prepare Chilly Pepper’s Schedule of Projected Cash Receipts for September.

B. Prepare Chilly Pepper’s Schedule of Projected Cash Payments for MERCHANDISE for September.

C. Prepare Chilly Pepper’s Project Cash Budget for September.

Answer 1

Answer:

A. Chilly Pepper’s Schedule of Projected Cash Receipts for September:

B. Chilly Pepper’s Schedule of Projected Cash Payments for MERCHANDISE for September:

(Please ignore this blank table, the solution is given in next table)

C. Chilly Pepper’s Projected Cash Budget for September:

Projected cash budget
Receipts		Amount
Receipts for sale:
For the month of September (40% of $165,000)	$66,000
For the month of August (35% of $195,000)	$68,250
for the month of July (22% of $120,000)	$26,400	$160,650
Total receipts (A)		$160,650
Disbursements
Payment for merchandise:
For the month of September (30% of $180,000)	$54,000
for the month of August (70% of $150,000)	$105,000	$159,000
Payment for general operating expenses		$20,000
Payment against loan:
Principal	$2,600
Interest	$400	$3,000
Total cash disbursement (B)		$182,000
Minimum cash balance required at the end of the month ( C)		$10,000
Total cash required during the month (D = B + C)		$192,000
Surplus/deficit of cash receipts over cash required during the month (A - D)		($31,350)
Amount to be borrowed against the line of credit (E)		$31,350
Closing cash balance (A + E - B)		$10,000

Schedule of projected cash receipts for the month of September Amount Cash receipts Receipts for sales: Receipt for the month of September (40% of $165,000) Receipt for the month of August (35% of $195,000) Receipt for the month of July (22% of $120,000) Total receipts $66,000 $68,250 $26,400 $160,650

Schedule of projected cash disbursements for merchandise for the month of September Amount Cash disbursements Payment for purchase of merchandise: For the month of September (30% of $180,000) For the month of August (70% of $150,000) Total disbursements $54,000 $105,000 $159,000

Schedule of projected cash receipts for the month of September Amount Cash receipts Receipts for sales: Receipt for the month of September (40% of $165,000) Receipt for the month of August (35% of $195,000) Receipt for the month of July (22% of $120,000) Total receipts $66,000 $68,250 $26,400 $160,650

Schedule of projected cash disbursements for merchandise for the month of September Amount Cash disbursements Payment for purchase of merchandise: For the month of September (30% of $180,000) For the month of August (70% of $150,000) Total disbursements $54,000 $105,000 $159,000

Schedule of projected cash receipts for the month of September Amount Cash receipts Receipts for sales: Receipt for the month of September (40% of $165,000) Receipt for the month of August (35% of $195,000) Receipt for the month of July (22% of $120,000) Total receipts $66,000 $68,250 $26,400 $160,650

Schedule of projected cash disbursements for merchandise for the month of September Amount Cash disbursements Payment for purchase of merchandise: For the month of September (30% of $180,000) For the month of August (70% of $150,000) Total disbursements $54,000 $105,000 $159,000