a Kind Company s preparing the cash budget for March 20x1 Th

a) Kind Company s preparing the cash budget for March 20x1. The callecion atten for credit sales has been 60% in the month of sale, 30% in the first month after sale, and the rest in the second month after sales. There are cash sales each month equal to 50% of total sales. The total sales for the first quarter were estimated as follows: 9 January: $30,000 February: $20,000 $25,000 March: What amount would be the projected cash collections for March? A. 12,000 B. 24,000 C. 24,500 D. 25,000 2) Gibor Corp. is preparing the cash budget for December 20x1. The payment pattern for the purchase of merchandise has been 75% in the month of sale, 15% in the first month after sale, and the rest in the second month after sales. The company usually receives a 10% discount on all purchases. Accounts payable on January 1t was $25,000. The total purchase for the third quarter were estimated as follows: October: November: $75,000 December: $100,000 $50,000 What amount would be the projected cash payments for January? A. 52,875 B. 58,750 C. 82,125 D. 100,000

Solution

1) In March the projected cash collections will be as follows:-

10% of January credit sales = ($30,000*50%)*10% = $1,500

30% of February credit sales = ($20,000*50%)*30% = $3,000

60% of March credit sales = ($25,000*50%)*60% = $7,500

Total cash collections for March = $1,500+$3,000+$7,500 = $12,000

Therefore the correct option is A) $12,000

2) Projected cash payment for January is calculated as follows;-

for the month of October = ($50,000*90%)*10% = $4,500

for the month of November = ($75,000*90%)*15% = $10,125

for the month of December = ($100,000*90%)*75% = $67,500

Total payment for January = $4,500+$10,125+$67,500 = $82,125

Therefore the correct option will be C)$82,125

3) Nice\'s cost of goods sold will be equal to purchases made in 20X1 as there is no change in inventory. Purchases is calculated as follows:-

Accounts payable closing balance = 125%*$150,000 = $187,500

Purchases = Accounts Payable closing balance+Cash paid to Accounts payable-Accounts payable opening balance

= $187,500+$250,000-$150,000 = $287,500

Therefore the Nice\'s cost of goods sold for 20X1 will be $287,500. Hence the correct option is C)$287,500

4) Sales = Cost of goods sold + Gross margin

Sales = $287,500 + (40%*$287,500) = $287,500+$115,000 = $402,500

Hence the correct option is D)$402,500