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    KAB: Calculate expected cash collections & disbursements

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    KAB, Inc. a small retail store, had the following results in May. The budgets for June and July are also given:

    May June July
    (Actual) (Budgeted) (Budgeted)

    Sales: $42,000 $40,000 $45,000
    Less: COGS <21,000> <20,000> <22,500>
    Gross Margin 21,000 20,000 22,500
    Less S&A Exp. <20,000> <20,000> <20,000>
    Net Op Inc. $1,000 $0 $2500

    Sales are collected 80% in the MONTH OF SALE and 20% in the MONTH FOLLOWING THE SALE. There are no bad debts. The goods that are sold are purchased in the month PRIOR TO SALE. Suppliers of the goods are paid in the month FOLLOWING SALE. The S&A expenses are paid in the MONTH OF THE SALE.

    The amount of cash collected during the month of June should be:

    a) 32,000
    b) 40,000
    c) 40,400
    d) 41,000
    e) 45,000

    The cash disbursements during the month of June for goods purchased for resale AND for S&A should be:

    a) 40,000
    b) 41,000
    c) 42,500
    d) 43,500
    e) none of the above

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    https://brainmass.com/business/accounting/kab-calculate-expected-cash-collections-disbursements-284967

    Solution Summary

    The solution calculate expected cash collections and disbursements for June for KAB Inc.

    $2.19

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