Question

Preparing a financial budget—schedule of cash receipts and schedule of cash payments

Agua Cool is a distributor of bottled water. For each of the items, compute the amount of cash receipts or payments Agua Cool 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 \(14,000 at a gain of \)7,000. Accumulated depreciation on this equipment is \(5,000.

b. Management expects to sell 7,100 cases of water in August and 9,000 cases in September. Each case sells for \)14. Cash sales average 20% of total sales, and credit sales make up the rest. Three-fourths of credit sales are collected in the month of the sale, with the balance collected the following month.

c. The company pays rent and property taxes of $4,500 each month. Commissions and other selling expenses average 30% of sales. Agua Cool pays one-half of commissions and other selling expenses in the month incurred, with the balance paid the following month.

Short answer

Answer

The total cash receipts and cash payments for the month of September is $136,680 and $36,980 respectively.

Step-by-step solution

Preparation of schedule of cash receipts

	August	September
Sale of water cases	$99,400	$126,000
Cash sales (20%)	$19,880	$25,200
Credit sales (80%) 3/4thin the month of sales	$59,640	$75,600
Credit sales (80%) balance in following month	$0	$19,880
Cash from sale of equipment	$0	$16,000
Total cash receipts	$79,520	$136,680

Preparation of schedule of cash payments

	August	September
Rent and property tax	$4,500	$4,500
Add: Commission and other selling expenses	$9,940	$32,480
Total cash payments	$14,440	$36,980