Ojai Products a distributor of organic beverages needs a cas

Ojai Products, a distributor of organic beverages, needs a cash budget for September. The following information is available: a. The cash balance at the beginning of September is $14,000. b. Actual sales for July and August and expected sales for September are as follows: July August September Cash sales $ 8,500 $ 6,500 $ 11,900 Sales on account 22,200 27,200 38,200 Total sales 30,700 33,700 50,100 Sales on account are collected over a three-month period as follows: 10% collected in the month of sale, 65% collected in the month following sale, and 21% collected in the second month following sale. The remaining 4% is uncollectible. c. Purchases of inventory will total $22,600 for September. Thirty 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 $13,600, all of which will be paid in September. d. Selling and administrative expenses are budgeted at $15,200 for September. Of this amount, $5,200 is for depreciation. e. Equipment costing $20,400 will be purchased for cash during September, and dividends totaling $2,800 will be paid during the month. f. The company maintains a minimum cash balance of $10,000. An open line of credit is available from the company’s bank to bolster the cash balance as needed. Required: 1. Prepare a schedule of expected cash collections for September. (Do not round intermediate calculations.) 2. Prepare a schedule of expected cash disbursements for inventory purchases for September. (Do not round intermediate calculations.) 3. Prepare a cash budget for September. Indicate in the financing section any borrowing that will be needed during September. Assume that any interest will not be paid until the following month.

Solution

1. Expected Cash Collections for September

2. Expected Cash disbursments for Inventor Purchase

August month balances paid =13600

Paid for September month Purchase = 6780 (22600x30%)

TOTAL = 20380

3. Cash Budget for September month

* Total cash balance before considering the credit is -1518. Company has to keep minimum of 10000 as balance. So company has to borrow 11518 from open line credit