Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September while also computing the total cash disbursements for merchandise purchases for the quarter ended September 30th.
|Colerain Corporation Balance Sheet June 30|
|Plant and equipment, net of depreciation||200,000|
|Liabilities and Stockholders' Equity|
|Total liabilities and stockholders' equity||$||458,000|
Additional assumptions and estimates included in the problem:
Estimated sales for July August September and October will be 200,000, 220,000, 210,000, and 230,000 respectively all sales are on credit, and all credit sales are collected. Each month's credit sales are collected 30% in the month of sale and 70% in the month following the sale.
All of the accounts receivable at June 30 will be collected in July monthly selling, and administrative expenses are always 65,000.
Each month 5,000 of this total amount is depreciation expense, and the remaining 60,000 relates to expenses that are paid in the month they are incurred each months ending inventory must equal 40% of the cost of next months sales.
The cost of goods sold is 65% of sales. The company pays for 50% of its merchandise purchases in the month of the purchase and the remaining 50% in the month following the purchase. All of the accounts payable at June 30 will be paid in July.
The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30.
The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30.
Cash Disbursements are outflows that is expected by the company to settle their obligations to pay the financial expenditure incurred in conducting the normal operations of the business. Cash disbursements can be processed thru cash, checks or from petty cash fund, depending on the company policy. Company must properly maintain and monitor all outflows coming from the payment of expenditure to deter the chances of fraudulent acts from internal and external sources.
Answer and Explanation:
|Beg. Inventory + Purchases - Ending Inventory = Cost of Goods Sold|
|Purchases = Cost of Goods Sold - Beginning Inventory + Ending Inventory|
|Est. Credit Sales||200,000||220,000||210,000||230,000|
|65% of Sales||65%||65%||65%||65%|
|Cost of Goods Sold||65%||130,000||143,000||136,500||149,500|
|Purchases per Month||135,200||140,400||141,700|
|Payment of Purchases||July||August||September||Total|
|% during the month||50%||67,600||70,200||70,850|
|% the following month||50%||67,600||70,200|
|Total Cash Disbursement for Purchases||67,600||137,800||141,050||346,450|
Learn more about this topic:
from Finance 101: Principles of FinanceChapter 18 / Lesson 4