Question

Sophisticates, Inc., a distributor of jewelry throughout California, 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, $75,000; accounts receivable, $240,000; and accounts payable, $81,000. • Sophisticates, Inc., maintains a $75,000 minimum cash balance at all times. Financing is available (and retired) in $1,000 multiples at an 9 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:

	January			February			March
Sales revenue	$	600,000		$	690,000		$	705,000
Merchandise purchases		420,000			450,000			570,000
Cash operating costs		108,000			87,000			150,000
Proceeds from sale of equipment		—			—			30,000
1) 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

2)

	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 $0 $0 $0

Answer 1

			JAN	FEB	MARCH
Collections from Accounts rec.			48000
Colelctions from Jan sales			360000	180000
Collections from Feb Sales				414000	207000
Collections from march sales					423000
Sale of equipment					30000
Total Cash collections			408000	594000	660000
			Jan	Feb	March
Payment of Accounts payable			81000
Payment of jan Purchases			252000	168000
Payment of Feb Purchases				270000	180000
Paymente of March Purchases					342000
Cash operating cost			108000	87000	150000
Total cash disbursement			441000	525000	672000
CASH BUDGET:
			JAN	FEB	MARCH
Beginning Balance of cash			75000	75000	110505
Add: Collections			408000	594000	660000
Total Cash avaialable			483000	669000	770505
Disbursements			441000	525000	672000
Excess/Defficiency)			42000	144000	98505
Borrowings			33000		0
Repayment				-33000	0
Interest Paid				-495
Total Financing			33000	0	0
cash balance ending			75000	110505	98505