Reference no: EM132786513
Question - Charlie Co. has planned the following sales and purchases for the next three months:
January February March
Budgeted Sales $40,000 $50,000 $70,000
Budgeted purchase of inventory $35,500 $46,700 $95,500
Customers pay 20% of the sales in cash at the time of the transaction and 80% on account. From experience, the company has learned that a month's sales on account are collected according to the following pattern:
Month of sale 60%
First month following sale 30%
Second month following sale 8%
Uncollectible 2%
The company pays 45% of the cost of the inventory in the month of purchase, and 55% during the following month.
The company requires a minimum cash balance of $5,000 to start a month. The beginning cash balance in March is budgeted to be $6,000.
The following additional information has been provided for March:
Operating expenses $25,000
Dividends paid in March $4,000
The operating expenses include $5,000 depreciation. All operating expenses are paid during each month.
Required -
a. Calculate the budgeted cash collection for March.
b. Calculate the balance of accounts payable at the end of March.
c. Prepare a cash budget in good form for the month of March.