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Graham Potato Company has projected sales of $9,600 in September, $13,000 in October, $19,600 in November,...

Graham Potato Company has projected sales of $9,600 in September, $13,000 in October, $19,600 in November, and $15,600 in December. Of the company's sales, 30 percent are paid for by cash and 70 percent are sold on credit. Experience shows that 40 percent of accounts receivable are paid in the month after the sale, while the remaining 60 percent are paid two months after. Determine collections for November and December.
  
Also assume Graham’s cash payments for November and December are $16,500 and $9,000, respectively. The beginning cash balance in November is $5,000, which is the desired minimum balance.

a. Prepare a cash receipts schedule for November and December.

Graham Potato Company
Cash Receipts Schedule
September October November December
Sales
Credit sales
Cash sales
One month after sale
Two months after sale
Total cash receipts $0 $0

b. Prepare a cash budget with borrowing needed or repayments for November and December. (Negative amounts should be indicated by a minus sign. Assume the November beginning loan balance is $0.)

Graham Potato Company
Cash Budget
November December
Total cash receipts
Total cash payments
Net cash flow $0 $0
Beginning cash balance
Cumulative cash balance $0
Monthly borrowing (repayment) 0
Ending cash balance $0
Cumulative loan balance
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Answer #1
Graham Potato Company
Cash Receipts Schedule
September October November December
Sales 9600 13000 19600 15600
Credit sales 6720 9100 13720 10920
Cash sales 2880 3900 5880 4680
One month after sale 2688 3640 5488
Two months after sale 4032 5460
Total cash receipts $13,552 $15,628
Graham Potato Company
Cash Budget
November December
Total cash receipts $13,552 $15,628
Total cash payments 16500 9000
Net cash flow ($2,948) $6,628
Beginning cash balance 5000 5000
Cumulative cash balance $2,052 $11,628
Monthly borrowing (repayment) $2,948 ($2,948)
Ending cash balance $5,000 $8,680
Cumulative loan balance $5,000 $8,680
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