Reference no: EM132514965

Mary and Kay, Inc., a distributor of cosmetics throughout Florida, is in the process of assembling a cash budget for the first quarter of 20x1. The following information has been extracted from the company's accounting records:

1. All sales are on account. Sixty percent of customer accounts are collected in the month of sale; 35 percent are collected in the following month. Uncollectibles amounting to 5 percent of sales are anticipated, and management believes that only 20 percent of the accounts outstanding on December 31, 20x0, will be recovered and that the recovery will be in January 20x1.
2. Seventy percent of the merchandise purchases are paid for in the month of purchase; the remaining 30 percent are paid for in the month after acquisition.
3. The December 31, 20x0, balance sheet disclosed the following selected figures: cash, $65,000; accounts receivable, $185,000; and accounts payable, $70,000.
4. Mary and Kay, Inc. maintains a $65,000 minimum cash balance at all times. Financing is available (and retired) in $1,000 multiples at an 9 percent interest rate, with borrowings taking place at the beginning of the month and repayments occurring at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid at that time.

Additional data:

                               January.              February.                March

Sales revenue            $490,000            $580,000             $595,000

Merchandise purchases  310,000           340,000                  460,000

Cash operating costs         97,000            76,000                139,000

Proceeds from sale of equipment  -                 -                  19,000

Question 1: Prepare schedule that discloses the firm's total cash collections for January through March.

                                          January.    February.    March

Collection of accounts receivable. _________, ________, _________

Collection of January sales _________, ________, _________

Collection of February sales _________, ________, _________

Collection of March sales _________, ________, _________

Sale of equipment _________, ________, _________

Total cash collections _________, ________, _________

Question 2: prepare schedule that discloses the firm's total cash disbursements for January through March.

                                                January.      February.    March

Payment of accounts payable _________, ________, _________

Payment of January purchases _________, ________, _________

Payment of February purchases _________, ________, _________

Payment of March purchases _________, ________, _________

Cash operating costs _________, ________, _________

Total cash disbursements _________, ________, _________

Question 3: Prepare schedule that summarizes the firm's financing cash flows for January through March.