Question

Timpco, a retailer, makes both cash and credit sales (i.e., sales on open account). Information regarding budgeted sales for the last quarter of the year is as follows: November $59,000 October December $ 65,000 65,000 $130,000 $77,000 Cash sales Credit sales 70,800 $ 129,800 84,700 $161,700 Total Past experience shows that 5% of credit sales are uncollectible. Of the credit sales that are collectible, 60% are collected in the month of sale; the remaining 40% are collected in the month following the month of sale. Customers are granted a 1.5% discount for payment within 10 days of billing. Approximately 75% of collectible credit sales take advantage of the cash discount. Inventory purchases each month are 100% of the cost of the following month's projected sales. (The gross profit rate for Timpco is approximately 30%.) All merchandise purchases are made on credit, with 20% paid in the month of purchase and the remainder paid in the following month. No cash discounts for early payment are in effect Required: 1. Calculate the budgeted total cash receipts for November and December. (Round your intermediate calculations and final answers to the nearest whole dollar amount.) 2. Calculate budgeted cash disbursements for November and December (budgeted total sales for January of the coming year equals $163,000) December November 1. Total cash receipts 2. Budgeted cash disbursements

Answer 1

1)

	November	December
Cash receipt from:
Cash sales	$59000	$77000
Credit sale of October
(65000*95%*40%*75%*98.5%)	18247
(65000*95%*40%*25%)	6175
Credit sale of November
(70800*95%*60%*75%*98.5%)	29813
(70800*95%*60%*25%)	10089
(70800*95%*40%*75%*98.5%)		19875
(70800*95%*40%*25%)		6726
Credit sale of December
(84700*95%*60%*75%*98.5%)		35666
(84700*95%*60%*25%)		12070
Total cash receipt	$123324	$151337

As 5% of the credit sale is uncollectible that means (100%-5%= 95% of the credit sales is collectible.

60% of the collectible credit sale is collected in the month of sale while the 40% of the collectible credit sale is collected in the following month of sale

75% of the collectible credit sale take advantage of cash discount that means (100%-75%)= 25% of the collectible credit sale does not take advantage of cash discount.

Cash discount= 1.5%

2)

	November	December
Cash paid in November
October (129800*70%*80%)	$72688
November (161700*70%*20%)	22638
Cash paid in December
November (161700*70%*80%)		90552
December (163000*70%*20%)		22820
Total cash disbursements	$95326	$113372

Gross profit is 30% that means cost of goods sold is 70%

Cash paid in the month of purchase is 20% that means the remaining 80% will be paid in the following month