#### wilsondm

A Company supplies chemicals to industry. Data regarding the store's operations follow:

- Sales are budgeted at \$330,000 for November, \$300,000 for December, and
\$320,000 for January.
- Collections are expected to be 85% in the month of sale, 14% in the month
following the sale, and 1% uncollectible.
- The cost of goods sold is 60% of sales.
- The company purchases 80% of its merchandise in the month prior to the month
of sale and 20% in the month of sale. Payment for merchandise is made in the
month following the purchase.
- Other monthly expenses to be paid in cash are \$21,200.
- Monthly depreciation is \$21,000.
- Ignore taxes.

Required:

a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.
c. Prepare Cash Budgets for November and December.
d. Prepare Budgeted Income Statements for November and December.
e. Prepare a Budgeted Balance Sheet for the end of December.

My question is: In part C, do I not need to add back the beginning cash balance of Oct cash \$22,000 to November? the answer hasn't included the beginning cash balance. if yes then the ending cash balance of November should be \$22,000 + \$146,300 = 168,300

Thanks a lot!

#### kirby

VIP Member
Adding the beginning cash is needed if you really want the correct amount of excess of cash AVAILABLE over disbursements. If the title was excess of cash COLLECTED then you would exclude the \$22,000.

#### wilsondm

Adding the beginning cash is needed if you really want the correct amount of excess of cash AVAILABLE over disbursements. If the title was excess of cash COLLECTED then you would exclude the \$22,000.
Hi Kirby,

Thanks a lot for your quick reply! the question asked "Prepare Cash Budgets for November and December" so I think i should include the \$22,000 cash from October to be the "ending cash balance right?

#### kirby

VIP Member
Yes. In particular, the answer uses the term "Excess of cash available" and available cash would include the \$22,000 unless it magically disappeared! But note that textbooks sometimes contain uncorrected errors which some teachers follow without question.

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