Timpco, a retailer, makes both
Timpco, a retailer, makes both cash and credit sales (i.e.,sales on open account). Information regarding budgeted sales forthe last quarter of the year is as follows:
| October | November | December | |||||||
| Cash sales | $ | 120,000 | $ | 99,000 | $ | 97,000 | |||
| Credit sales | 120,000 | 118,800 | 106,700 | ||||||
| Total | $ | 240,000 | $ | 217,800 | $ | 203,700 | |||
Past experience shows that 5% of credit sales are uncollectible.Of the credit sales that are collectible, 60% are collected in themonth of sale; the remaining 40% are collected in the monthfollowing the month of sale. Customers are granted a 1.5% discountfor payment within 10 days of billing. Approximately 75% ofcollectible credit sales take advantage of the cash discount.
Inventory purchases each month are 100% of the cost of thefollowing month’s projected sales. (The gross profit rate forTimpco is approximately 30%.) All merchandise purchases are made oncredit, with 20% paid in the month of purchase and the remainderpaid in the following month. No cash discounts for early paymentare in effect.
Required:
1. Calculate the budgeted total cash receipts for November andDecember. (Round your intermediate calculations and finalanswers to the nearest whole dollar amount.)
2. Calculate budgeted cash disbursements for November andDecember (budgeted total sales for January of the coming yearequals $193,000).
Answer:
| Statement showing calculation of Cash receivable | ||
| November | December | |
| Cash sales | $ 99,000 | $ 97,000 |
| Credit sales of october | $ 45,087(112,718*40%) | |
| Credit sales of november | $ 66,954(111,590*60%) | $ 44,636(111,590*40%) |
| Credit sales of december | $ 60,135(100,225*60%) | |
| Total cash collected | $ 211,041 | $ 201,771 |
Note: 60% cash collected of credit sales in month of sales andnext 40% in next month.
| Statement showing calculation of cash received from creditsales | |||
| October | November | December | |
| Total credit sales | $ 120,000 | $ 118,800 | $ 106,700 |
| Total credit sales receivable | $ 114,000(120,000*95%) | $ 112,860(118,800*95%) | $ 101,365 (106,700*95%) |
| Cash discount on credit sales of 1.5% on 75% credit salescollectible | $ (1,283)(114,000*75%*1.5%) | $ (1,270)(112,860*75%*1.5%) | $ (1,140)(101,365*75%*1.5%) |
| Total credit sales collectible after cash discount | $ 112,718 | $ 111,590 | $ 100,225 |
Note:
Credit sales 95% of cash is collectible and than cash discountprovided on 75% collectible sales at 1.5%
| Statement showing calculation of cash disbursements | ||
| November | December | |
| Cash paid for inventory purchase of october | $ 121,968(152,460*80%) | |
| Cash paid for inventory purchase of November | $ 28,518(142,590*20%) | $ 114,072(142,590*20%) |
| Cash paid for inventory purchase of December | $ 27,020(135,100*20%) | |
| $ 150,486 | $ 141,092 |
Not: Cash paid 20% in month of purchases and 80% in followingmonth
| Statement showing calculation of inventory purchases | ||||
| October | November | December | January | |
| Total sales | $ 240,000 | $ 217,800 | $ 203,700 | $ 193,000 |
| Gross profit=30% | $ 72,000(240,000*30%) | $ 65,340(217,800*30%) | $ 61,110(203,700*30%) | $ 57,900(193,000*30%) |
| Cost of sales | $ 168,000 | $ 152,460 | $ 142,590 | $ 135,100 |
| Inventory purchases | $ 152,460 | $ 142,590 | $ 135,100 |
Inventory purchases are made as 100% of the cost of sales ofnext month
Cost of sales=Total sales-Gross profit
Gross profit=Total sales*30%
"Our Prices Start at $11.99. As Our First Client, Use Coupon Code GET15 to claim 15% Discount This Month!!"
