Reference no: EM132770437

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:

Problem a. Calculate the budgeted cash collection for March.

Problem b. Calculate the balance of accounts payable at the end of March.

Problem c. prepare a 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)