Question

Del Spencer is the owner and founder of Del Spencer's Men's Clothing Store. Del Spencer's has its own house charge accounts and has found from past experience that 10 percent of its sales are for cash. The remaining 90 percent are on credit. An aging schedule for accounts receivable reveals the following pattern:

15 percent of credit sales are paid in the month of sale.
65 percent of credit sales are paid in the first month following the sale.
14 percent of credit sales are paid in the second month following the sale.
6 percent of credit sales are never collected.

Credit sales that have not been paid until the second month following the sale are considered overdue and are subject to a 3 percent late charge.

Del Spencer's has developed the following sales forecast:

May	$60,000
June	55,000
July	45,000
August	56,000
September	83,000

Del Spencer's purchases clothing evenly throughout the month. All purchases are on account. On the first of every month, Jana Spencer, Del's wife, pays for all of the previous month's purchases. Terms are 2/10, n/30 (i.e., a 2 percent discount can be taken if the bill is paid within 10 days; otherwise, the entire amount is due within 30 days).

The forecast purchases for the months of May through September are as follows:

May	$30,000
June	27,500
July	22,500
August	28,000
September	41,500

Required:

1. Prepare a cash disbursements schedule for the months of August and September. (Round all cash amounts to the nearest dollar.)

Del Spencer's Men's Clothing Store
Cash Disbursements Schedule
For the Months of August and September
	August	September
July:	$
August:		$
Total	$	$

2. Now, suppose that Del wants to see what difference it would make to have someone pay within the discount period for any purchases that have been made three times per month, on the 1st, the 11th, and the 21st. Prepare a cash disbursements schedule for the months of July and August assuming this new payment schedule. (Round all cash amounts to the nearest dollar.)

Del Spencer's Men's Clothing Store
Cash Disbursements Schedule
For the Months of July and August
	July	August
July 1:	$
July 11:
July 21:
Aug. 1:		$
Aug. 11:
Aug. 21:
Total	$	$

Answer 1

Cash disbursements schedules are as prepared below:

Del Spencer's Men's Clothing Store
Cash Disbursements Schedule
For the Months of August and September
	August	September
July:
22,500*1/3*.98	7350
22,500*2/3	15,000
August:
28,000*1/3*.98		9,147
28,000*2/3		18,667
Total	22,350	27,813
Del Spencer's Men's Clothing Store
Cash Disbursements Schedule
For the Months of July and August
	July	August
July 1: 27,500*1/3*.98	8,983
July 11: 22,500*1/3*.98	7,350
July 21: 22,500*1/3*.98	7,350
Aug. 1: 22,500*1/3*.98		7,350
Aug. 11: 28,000*1/3*.98		9,147
Aug. 21: 28,000*1/3*.98		9,147
Total	23,683	25,643