Question

The beginning cash balance is $10,000. Sales are forecasted at $800,000 of which 80% will be...

The beginning cash balance is $10,000. Sales are forecasted at $800,000 of which 80% will be on credit. 70% of credit sales are expected to be collected in the year of sale. Cash expenditures for the year are forecasted at $475,000. Accounts Receivable from previous accounting periods totaling $9,000 will be collected in the current year. The company is required to make a $15,000 loan payment and an annual interest payment on the last day of every year. The loan balance as of the beginning of the year is $90,000, and the annual interest rate is 10%.

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Compute the excess of cash receipts over cash disbursements.

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Answer #1

Solution:

Computation of excess of cash receipts over cash disbursement
Particulars Amount
Cash Receipts:
Cash Sales ($800,000*20%) $160,000.00
Collection of current year credit sales ($800,000*80%*70%) $448,000.00
Collection of accounts receivables from previous accounting period $9,000.00
Total Cash Receipts (A) $617,000.00
Cash Disbursements:
Cash Expenditure $475,000.00
Repayment of loan $15,000.00
Interest payment ($90,000*10%) $9,000.00
Total Cash disbursement (B) $499,000.00
Cash receipts over cash disbursements (A-B) $118,000.00
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