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Cash Budgets for Randall Company

Randall Company is a merchandising company that sells a single product. The company's inventories, production, and sales in units for the next three months have forecasted as follows:

October November December
Beginning Inventory 10,000 10,000 10,000
Merchandise Purchases 60,000 70,000 35,000
Sales 60,000 70,000 40,000
Ending Inventory 10,000 10,000 5,000

Units are sold for $12 each. One fourth of all sales are paid for in the month of sale and the balance is paid in the following month. Accounts receivable at September 30 totaled $450,000.

Merchandise is purchased for $7 per unit. Half of the purchases are paid for in the month of the purchase and the remainder is paid in the month following the purchase. Selling and administrative expenses are expected to total $120,000 each month. One half of these expenses will be paid in the month in which they are incurred and the balance will be paid in the following month. There is no depreciation. Accounts payable at September 30 totaled $290,000.

Cash at September 30 totaled $80,000. A payment of $300,000 for purchase of equipment is scheduled for November, and a dividend of $200,000 is to be paid in December.

Required:

a. Prepare a schedule of expected cash collection in good form for each of the months of October, November, and December.
b. Prepare a schedule showing expected cash disbursements for merchandise purchases and selling and administrative expenses for each of the months October, November, and December.
c. Prepare a cash budget in good form for each of the months October, November, and December. There is no minimum required ending cash budget.

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Solution Summary

This solution is comprised of a schedule of expected cash collection in good form for each of the months of October, November, and December, a schedule showing expected cash disbursements for merchandise purchases and selling and administrative expenses for each of the months October, November, and December, and a cash budget in good form for each of the months October, November, and December.

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