Reference no: EM132792241
Question - Charlie Co. has planned the following sales and purchases for the next three months:
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January
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February
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March
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Budgeted Sales
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$40,000
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$50,000
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$70,000
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Budgeted purchase of inventory
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$35,500
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$46,700
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$95,500
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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 cash budget in good form for the month of March (The company can borrow in any dollar amount and will not pay interest until April).
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