Question

In: Accounting

Ojai Products, a distributor of organic beverages, needs a cash budget for September. The following information...

Ojai Products, a distributor of organic beverages, needs a cash budget for September. The following information is available:

a. The cash balance at the beginning of September is $12,900.
b. Actual sales for July and August and expected sales for September are as follows:
July August September
  Cash sales $ 6,300    $ 4,300    $ 9,700   
  Sales on account 21,100    26,100    37,100   
  Total sales 27,400    30,400    46,800   

   

Sales on account are collected over a three-month period as follows: 10% collected in the month of sale, 65% collected in the month following sale, and 21% collected in the second month following sale. The remaining 4% is uncollectible.

c.

Purchases of inventory will total $24,800 for September. Thirty percent of a month's inventory purchases are paid for during the month of purchase. The accounts payable remaining from August's inventory purchases total $15,800, all of which will be paid in September.

d.

Selling and administrative expenses are budgeted at $14,100 for September. Of this amount, $4,100 is for depreciation.

e.

Equipment costing $18,200 will be purchased for cash during September, and dividends totaling $3,900 will be paid during the month.

f.

The company maintains a minimum cash balance of $8,900. An open line of credit is available from the company’s bank to bolster the cash balance as needed.

   

Required:
1.

Prepare a schedule of expected cash collections for September. (Do not round intermediate calculations.)

   

2.

Prepare a schedule of expected cash disbursements for inventory purchases for September. (Do not round intermediate calculations.)

3.

Prepare a cash budget for September. Indicate in the financing section any borrowing that will be needed during September. Assume that any interest will not be paid until the following month.

Solutions

Expert Solution

Schedule for Expected Cash Collection
July August
Cash Sale            6,300                4,300
Collected from July Credit Sale 2110 13715
Collected from August Credit Sale 2610
Collected from September Credit Sale
Total cash Collection in September month
Schedule for Expected Cash Disbursement
Purchase During the month of September          24,800
Payment:
Cash Payment for current month purchase            7,440
Payment for August month Purchase          15,800
Total Cash Disbursement for September Month          23,240
Cash Budget Amt.
Opening Balance 12900
Cash Collection During the month          34,806
Total Cash Avilable          47,706
Less: Disbursement
For Inventory Purchase          23,240
Selling And administrative Expenses (14100-4100)          10,000
Equipment Purchase          18,200
Dividend Paid            3,900
Total Cash Disbursement          55,340
Net Cash           -7,634
Add: Cash From Loan          16,534
Cash Balance at end            8,900

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