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Disbursements, Receipts, Cash Balance

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Table 2 (use for Problems 29-31)
Thompson Manufacturing Supplies' projected sales for the first six months of 2004 are given below.
Jan. $250,000 April $400,000
Feb. $300,000 May $450,000
March $400,000 June $400,000

40% of sales is collected in the month of the sale, 50% is collected in the month following the sale, and 10% is written off as uncollectible. Cost of goods sold is 70% of sales. Purchases are made the month prior to the sale and are paid during the month the purchases are made (i.e. goods sold in March are bought and paid for in February). Total other cash expenses are $50,000/month. The company's cash balance as of February 1, 2004 will be $40,000. Excess cash will be used to retire short-term borrowing (if any). Thompson has no short-term borrowing as of February 28, 2004. Assume that the interest rate on short-term borrowing is 1% per month. The company must have a minimum cash balance of $25,000 at the beginning of each month. Round all Answers to the nearest $100.

29. Based on the information in Table 2, what are Thompson's projected total disbursements for April?
a. $365,000
b. $315,000
c. $5,000
d. $96,607

30. Based on the information in Table 2, what are Thompson's projected total receipts (collections) for March?
a. $400,000
b. $310,000
c. ($20,000)
d. None of the above

31. Based on the information in Table 2, what is Thompson's projected cash balance as of April 1, 2004?
a. $32,000
b. $4,300
c. $25,000
d. None of the above

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Solution Summary

This solution explains how to calculate total disbursements, total collections, and the projected cash balance for various months based on sales and inventory costs for several months.

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Managerial accountiing

Carter Company has projected sales and production in units for the second quarter of next year as follows:

April May June
Sales 60,000 40,000 50,000
Production 50,000 50,000 60,000

Required:

a. Cash production costs are budgeted at $6 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses (all of which are paid in cash) amount to $120,000 per month. The accounts payable balance on March 31 totals $192,000, all of which will be paid in April. Prepare a schedule for each month showing budgeted cash disbursements for Carter Company.

b. Assume that all units will be sold on account for $15 each. Cash collections from sales are budgeted at 60% in the month of sale, 30% in the month following the month of sale, and the remaining 10% in the second month following the month of sale. Accounts receivable on March 31 totaled $510,000 ($90,000 from February's sales and the remainder from March). Prepare a schedule for each month showing budgeted cash receipts for Carter Company.

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