PROBLEM 8–16 Schedules of Expected Cash Collections and Disbursements [LO2, LO4, LO8] 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:

 

 

Â	July	Â	August	September
Cash sales . . . . . . . . . . .	$ 6,500	Â	$ 5,250	$ 7,400
Sales on account . . . . . .	  20,000	Â	  30,000	  40,000
Total sales . . . . . . . . . . . .	$26,500	Â	$35,250	$47,400

 

 

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 uncollectible.

c.        Purchases of inventory will total $25,000 for September. Twenty percent of a month’s inven- tory 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.

d.       Selling and administrative expenses are budgeted at $13,000 for September. Of this amount,

$4,000 is for depreciation.

 

 

 

 

e.        Equipment costing $18,000 will be purchased for cash during September, and dividends total- ing $3,000 will be paid during the month.

f.        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 balance as needed.

Required:

1.       Prepare a schedule of expected cash collections for September.

2.       Prepare a schedule of expected cash disbursements for inventory purchases for September.

3.       Prepare a cash budget for September. Indicate in the financing section any borrowing that will be needed during September. Assume that any interest will not be paid until the following month.