Discuss two important reasons why harris kidz should

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Reference no: EM13579068

Harris Kidz is a retail store specializing in children%u2019s clothing. Harris%u2019s management accountant has
gathered the following information for Harris Kidz.
Month Sales Purchases
July $225,000 $123,750
August $180,000 $99,000
September $240,000 $132,000
October $202,500 $112,000
Cash is collected from customers in the following manner:
%uF0B7 Month of the sale 65%
%uF0B7 First month following the sale 25%
%uF0B7 Second month following the sale 8%
%uF0B7 Uncollectable 2%
Purchases of inventory are paid as follows:
%uF0B7 Cash payment in month of purchase 60%
%uF0B7 Cash payment in month following purchase 40%
Additional information:
%uF0B7 Labor costs equal 20% of sales
%uF0B7 Other operating costs equal $35,000 per month, that amount includes $8,750 of depreciation.
%uF0B7 Labor and operating costs are paid in the month incurred.
%uF0B7 The cash balance on September 1 is $10,000.

Required: Show all supporting calculations for credit.
1. Calculate the amount of cash receipts for August, September and October.
2. Calculate the amount of cash disbursements for August, September and October.
3. Calculate the cash balance at October 31.
4. Discuss two important reasons why Harris Kidz should prepare cash budgets.

Reference no: EM13579068

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