Reference no: EM132585914

Calgon Products, a distributor of organic beverages, needs a cash budget for September. The following information is available:

a. The cash balance at the beginning of September is $9,000.

b. Actual sales for July and August and expected sales for September are as follows:

                                                   July             August             September

Cash Sales                         $6,500           $5,250         $7,400

Sales on Account                 20,000              30,000       40,000

Total Sales                          $26,500            $35,250     $47,400

c. Sales on account are collected over a three-month period as follows: 10% collected in the month of sale, 70% collected in the month following sale, and 18% collected in the second month following sale. The remaining 2% is collectible.

d. Purchases of inventory will total $25,000 for September. Twenty percent of a month's inventory purchases are paid for during the month of purchase. The accounts payable remaining from August's inventory purchases total $16,000, all of which will be paid in September.

e. Selling and administrative expenses are budgeted at $13,000 for September. Of this amount, $4,000 is for depreciation.

f. Equipment costing $18,000 will be purchased for cash during September, and dividends totaling $3,000 will be paid during the month.

g. The company maintains a minimum cash balance of $5,000. An open line of credit is available from the company's bank to bolster the cash position as needed.

Required:

Question 1. Make a schedule of expected cash collections for September.

Question 2. Make a schedule of expected cash disbursements during September for inventory purchases.

Question 3. Make a cash budget for September. Indicate in the financing section any borrowing that will be needed during September.