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Calgon Products: Prepare expected cash collections, disburse

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EXERCISE 7-12 Schedules of Expected Cash Collections and Disbursements;
Cash Budgets (LO2, LO4, LO8)

You have been asked to prepare the September cash budget for Calgon Products, a distributor of organic beverages. 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:
July August September

Cash sales $6,500 $5,250 $7,400
Sales on account $20,000 $30,000 $40,000

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 sales. The remaining 2% is

c. Purchases of inventory will total $25,000 for September. Twenty percent of a month's inventory 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 totaling $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 position as needed.

1. Prepare a schedule of expected cash collections for September.
2. Prepare a schedule of expected cash disbursements for merchandise inventory purchases in September.
3. Prepare a cash budget for September. Indicate in the financing section any borrowing that will be need during September.

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