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Calculate the amount of cash receipts for march and april

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Reference no: EM131874422

Problem - One Stop Jersey Stop (OSJS) sells sports jerseys. OSJS's management accountant has gathered the following information for OSJS.

Month Sales Purchases

February $42,000 $17,640

March $48,000 $20,160

April $54,000 $22,680

May $50,000 $21,000 

Cash is collected from customers in the following manner:

Month of the sale 25%

First month following the sale 40%

Second month following the sale 20%

Third month following the sale 10%

Uncollectable 5%

Purchases of inventory are paid as follows:

Cash payment in month of purchase 40%

Cash payment in month following purchase 60%

Additional information:

Labor costs equal 19% of sales

Other operating costs equal $15,000 per month that amount includes $4,000 of depreciation.

Labor and operating costs are paid in the month incurred.

The cash balance on April 1 is $4,000.

Required: Show all supporting calculations for credit.

Calculate the amount of cash receipts for March, April and May.

Calculate the amount of cash disbursements for March, April and May.

Calculate the cash balance at May 31.

Discuss two important reasons why OSJS should prepare cash budgets.

Reference no: EM131874422

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