Question

The following information pertains to Amigo Corporation:Show the calculations

      Month                        Sales         Purchases

      July                         $30,000             $10,000

      August                      34,000               12,000

      September                 38,000               14,000

      October                     42,000               16,000

      November                 48,000               18,000

      December                  60,000               20,000

?           Cash is collected from customers in the following manner:

            Month of sale (2% cash discount)     30%

            Month following sale                       50%

            Two months following sale              15%

            Amount uncollectible                        5%

?     40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.

Required:

a.   Prepare a summary of cash collections for the 4th quarter.

b.   Prepare a summary of cash disbursements for the 4th quarter.

Answer 1

a.summary of cash collections:

	october	november	december	total
August sale collection (34,000*15%)	5,100	nil	nil	$5,100
september sale collection (38,000*50%) (38,000*15%)	19,000	5,700	nil	24,700
october sale (42,000*30%*98% (after cash discount) (42,000* 50%) (42,000*15%)	12,348	21,000	6,300	39,648
november sale (48,000*30%*98%) (48,000*50%)	nil	14,112	24,000	38,112
december sale (60,000*30%*98%)	nio	nil	17,640	17,640
Total	36,448	40,812	47,940	125,200

b.summary of cash disbursements

	october	november	december	total
september purchase (14,000*60%)	8,400	nil	nil	8,400
october purchase (16,000*40%) (16,000*60%)	6,400	9,600	nil	16,000
novemmber purchase (18,000*40%) (18,000*60%)	nil	7,200	10,800	18,000
december purchase (20,000 *40%)	nil	nil	8,000	8,000
total	14,800	16,800	18,800	50,400