All sales are on account. 60% of customer accounts are collected in the month
of sale; 35% are collected in the following month. Uncollectibles amounting to
5% of sales are anticipated, and management believes that only 20% of the
accounts outstanding on Dec. 31, 20X0, will be recovered and that recovery
will be in January 20X1.
70% of the merchandise purchases are paid for in teh month of purchase; the
remaining 30% are paid for in teh month after acquisiton.
The December 31, 20X0, balance sheet disclosed the following selected
figures: cash, $60,000; accounts receivable, $165,000; and accounts
Sophisticates, Inc. maintains a $60,000 minimum cash balance at all times.
Financing is available (and retired) in $1,000 multiples at an 8% interest rate,
with borrowing taking place at the beginning of the month and repayments
occuring at the end of the month. Interest is paid at the time of repaying
principal and computed on the portion of principal repaid at the time .
Jan. Feb. March
Sales revenue $450,000 $540,000 $555,000
Merchandise purchases 270,000 300,000 420,000
Cash operating costs 93,000 72,000 135,000
Proceeds from sale of equp. 15,000
1. Prepare a schedule that discloses the firm's total cash collections for January through March
2. Prepare a schedule that discloses the firm's total cash disbursements for January through March
3. Prepare a schedule that discloses the firm's cash needs, if any, for January through March. The schedule should present the following information in the order cited: Beginning cash balance, total receipts, total payments, the cash excess (deficiency) before financing, borrowing needed, if any, loan principal repaid, if any, loan interest paid, if any, and ending cash balance.
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