Question

The following information is from White Mountain Furniture Showroom’s financial records. Month Sales Purchases July $ 80,000 $ 42,000 August 68,000 47,000 September 67,000 35,000 October 86,000 53,000 Collections from customers are normally 67 percent in the month of sale, 20 percent in the month following the sale, and 11 percent in the second month following the sale. The balance is expected to be uncollectible. All purchases are on account. Management takes full advantage of the 3 percent discount allowed on purchases paid for by the tenth of the following month. Purchases for November are budgeted at $66,000, and sales for November are forecasted at $72,000. Cash disbursements for expenses are expected to be $14,800 for the month of November. The company’s cash balance on November 1 was $31,000.

Required:

1.

Prepare the schedule for expected cash collections during November.

2.

Prepare the schedule for expected cash disbursements during November.

3.	Prepare the schedule for expected cash balance on November 30.

Answer 1

	Particulars	July	August	September	October	November
	Sales	80000	68000	67000	86000	72000		Collections:
	Purchases	42000	47000	35000	53000	66000		In the Month	67%
								In the First Month	20%
								In the Second Month	11%
1	Schedule of Expected Cash Collections:	November						Uncollectible	2%
	For the Nov Sales(72000*67%)	48240						Total	100%
	For the Oct Sales(86000*20%)	17200
	For the Sep Sales(67000*11%)	7370
	Total Collections	72810
2	Schedule of Expected Cash Payments:	November
	For the Oct Month Purchases	51410	(53000*(100-3%)
	For Expense	14800
	Total Payments	66210
3	Expected Cash Balance:	November
	Opening Cash Balance	31000
	Add: Total Collections	72810
	Total Cash Available	103810
	Less: Total Payments	66210
	Closing Cash Balance	37600