Question

Mary and Kay, Inc., a distributor of cosmetics throughout Florida, is in the process of assembling a cash budget for the first quarter of 20x1. The following information has been extracted from the company’s accounting records: •All sales are on account. Sixty percent of customer accounts are collected in the month of sale; 30 percent are collected in the following month. Uncollectibles amounting to 10 percent of sales are anticipated, and management believes that only 20 percent of the accounts outstanding on December 31, 20x0, will be recovered and that the recovery will be in January 20x1. •Sixty percent of the merchandise purchases are paid for in the month of purchase; the remaining 40 percent are paid for in the month after acquisition. •The December 31, 20x0, balance sheet disclosed the following selected figures: cash, $90,000; accounts receivable, $210,000; and accounts payable, $75,000. •Mary and Kay, Inc. maintains a $90,000 minimum cash balance at all times. Financing is available (and retired) in $1,000 multiples at an 10 percent interest rate, with borrowings taking place at the beginning of the month and repayments occurring at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid at that time. •Additional data:

Required:

Prepare a schedule that discloses the firm’s total cash collections for January through March.

Prepare a schedule that discloses the firm’s total cash disbursements for January through March.

Prepare a schedule that summarizes the firm’s financing cash flows for January through March

January			February			March
Sales revenue	$	540,000		$	630,000		$	645,000
Merchandise purchases		360,000			390,000			510,000
Cash operating costs		102,000			81,000			144,000
Proceeds from sale of equipment		—			—			24,000

Prepare a schedule that discloses the firm’s total cash collections for January through March.

	January February March Collection of accounts receivable Collection of January sales Collection of February sales Collection of March sales Sale of equipment Total cash collections

Prepare a schedule that discloses the firm’s total cash disbursements for January through March.

	January February March Payment of accounts payable Payment of January purchases Payment of February purchases Payment of March purchases Cash operating costs Total cash disbursements

Prepare a schedule that summarizes the firm’s financing cash flows for January through March.

	January February March Beginning cash balance Total receipts Subtotal Less: Total disbursements Cash excess (deficiency) before financing Financing: Borrowing to maintain $90,000 balance Loan principal repaid Loan interest paid Ending cash balance

Answer 1

	January	February	March
Collection of accounts receivable (210000*20%)	42000
Collection of January sales (540000*60%,30%)	324000	162000
Collection of February sales (630000*60%,30%))		378000	189000
Collection of March sales			387000
Sale of equipment			24000
Total cash collections	366000	540000	600000
Cash disburments
	January	February	March
Payment of accounts payable	75000
Payment of January purchases (360000*60%,40%)	216000	144000
Payment of February purchases (390000*60%,40%)		234000	156000
Payment of March purchases			306000
Cash operating costs	102000	81000	144000
Total cash disbursements	393000	459000	606000
Cash Budget
	January	February	March
Beginning cash balance	90000	90000	143550
Total receipts	366000	540000	600000
Subtotal	456000	630000	743550
Less: Total disbursements	393000	459000	606000
Cash excess (deficiency) before financing	63000	171000	137550
Financing:
Borrowing to maintain $90,000 balance	27000
Loan principal repaid		-27000
Loan interest paid		-450
Ending cash balance	90000	143550	137550
Interest
(27000*10%*2/12)	450
If any doubt please comemnt. If satisfied you can rate