Question

Agua Ole is a distributor of bottled water. For each of the​ items, compute the amount of cash receipts or payments Agua Ole will budget for September. The solution to one item may depend on the answer to an earlier item. ​

a. Management expects to sell equipment that cost $ 21,000 at a gain of $4,000. Accumulated depreciation on this equipment is $4,000.

a.

The amount of cash receipts the company will budget for the sale of the equipment is $

.

b. Management expects to sell 7,700 cases of water in August and 9,400 cases in September. Each case sells for $15. Cash sales average 10​% of total​ sales, and credit sales make up the rest.​ Three-fourths of credit sales are collected in the month of​ sale, with the balance collected the following month.

b.

The amount of cash receipts the company will budget for the collection of sale revenue is $

.

c. The company pays rent and property taxes of $4,200 each month. Commissions and other selling expenses average 10​% of sales. Agua Ole pays​ one-half of commissions and other selling expenses in the month​ incurred, with the balance paid the following month.

c.

The amount of cash payments for total expenses the company will budget for September is $

.

Answer 1

a. Calculation of the amount of cash receipts the company will budget for the sale of the equipment:-
	Cost of equipment	$           21,000
Less:	Accumulated depreciation	$             4,000
	Book Value of Equipment	$           17,000
Add:	Gain on sale of equipment	$             4,000
	Sale Value of Equipment	$           21,000
b. Calculation of the amount of cash receipts the company will budget for the collection of sale revenue in September :-
Sales Budget
		August	September
	Budgeted Sales Units (Cases)	7,700	9,400
	Selling Price per Unit	$             15.00	$                 15.00
	Budgeted Sales Revenue	$         115,500	$             141,000
Calculation of Cash Receipts from Customers
		August	September
	Total Budgeted Sales	$         115,500	$             141,000
	Cash Sales (10​% of total​ sales)	$           11,550	$               14,100
	Credit Sales	$         103,950	$             126,900
Total Cash Receipts from Customers
		September
	Current month's cash sales	$     14,100.00
	Collections of receivables
	3/4 portion of September month credit sales collected (126900 * 3/4)	$     95,175.00
	1/4 portion of August month credit sales collected (11550 * 1/4)	$        2,887.50
	Total Cash Receipts from Customers	$   112,162.50
c. Calculation of the amount of cash payments for total expenses the company will budget for September:-
		September
a	Payment of rent and property taxes	$             4,200
	Payment of Commissions and other selling expenses
b	September month Commissions and other selling expenses paid (10% of $141000 = $14100*1/2)	$             7,050
c	August month Commissions and other selling expenses paid (10% of $115500 = $11550*1/2)	$             5,775
d	Amount of cash payments for total expenses Budgeted for September (a+b+c)	$           17,025

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