Question

Information pertaining to Noskey Corporation’s sales revenue follows: November 2018 (Actual) December 2018 (Budgeted) January 2019 (Budgeted) Cash sales $ 120,000 $ 124,000 $ 76,000 Credit sales 288,000 416,000 212,000 Total sales $ 408,000 $ 540,000 $ 288,000 Management estimates 5% of credit sales to be uncollectible. Of collectible credit sales, 60% is collected in the month of sale and the remainder in the month following the month of sale. Purchases of inventory each month include 70% of the next month’s projected total sales (stated at cost) plus 30% of projected sales for the current month (stated at cost). All inventory purchases are on account; 25% is paid in the month of purchase, and the remainder is paid in the month following the month of purchase. Purchase costs are approximately 60% of the selling price. Required: Determine for Noskey: 1. Budgeted cash collections in December 2018 from November 2018 credit sales. 2. Budgeted total cash receipts in January 2019. 3. Budgeted total cash payments in December 2018 for inventory purchases.

Answer 1

1) Budgeted cash Collection in December 2018 From November 2018 Credit sales = 288000*35% = 100800

2) Total Cash receipt in January 2019

	January
Cash Sales	76000
Collection from December Credit Sales (416000*35%)	145600
Collection from January Credit Sales (212000*60%)	127200
Total Cash receipts	348800

3) Total Cash payments in December 2018 for inventory purchase :

November purchase = (408000*30%+540000*70%) = 500400*60% = 300240

December purchase = (540000*30%+288000*70%) = 363600*60% = 218160

Total Cash payment = 218160*25%+300240*75% = 279720