Question

Information pertaining to Noskey Corporation’s sales revenue follows: Nov 2018 (Actual) Dec 2018 (Budgeted) Jan 2019 (Budgeted) Cash sales $ 100,000 $ 112,000 $ 68,000 Credit sales 264,000 388,000 196,000 Total sales $ 364,000 $ 500,000 $ 264,000 Management estimates 5% of credit sales to be uncollectible. Of collectible credit sales, 60% is collected in the month of sale and the remainder in the month following the month of sale. Purchases of inventory each month include 70% of the next month’s projected total sales (stated at cost) plus 30% of projected sales for the current month (stated at cost). All inventory purchases are on account; 25% is paid in the month of purchase, and the remainder is paid in the month following the month of purchase. Purchase costs are approximately 60% of the selling price. Required: Determine for Noskey: (1) Budgeted cash collections in December 2018 from November 2018 credit sales. (2) Budgeted total cash receipts in January 2019. (3) Budgeted total cash payments in December 2018 for inventory purchases.

Answer 1

Answer:

1) Budgeted cash collections for December 2018 from November 2018 Sales - $ 100,320

2) Budgeted total cash collections for January 2019 - $ 221,880

3)  Budgeted total cash payments for December 2018 - $ 135,420

Explanation:

Computation of cash collections for December 2018 from November 2018

Credit Sales for November 2018                                                   $ 264,000

Less: Uncollectible sales - 5 % of credit sales                              $ (  13,200)

Collectible sales                                                                              $ 250,800

Percentage of collectible sales in month of sales- 60 %             $ (150,480)

Percentage of collectible sales in next month -Dec 18 - 40 % $ 100.320  

Computation of total cash collections for January 2019

Cash collections from December sales

Credit sales for December 2018              $ 388,000

Less 5 % Uncollectible sales                    $ ( 19,400)

Collectible sales                                        $ 366,600

Collections in month subsequent to sale 40 % * $ 366,600      $  147,400    

Cash collections from Januray 2019 sales

Credit sales for Janaury 2019                  $ 196,000

Less: 5 % uncollectible sales                   $(    9,800)

Collectible sales                                       $  186,200                      

Collections in month of sale 60 % * $ 186,200                          $    74,480

Total collections for January 2019                                            $ 221,880

Computation of cash payments for December 2018

Purchases for December 2018 sales - 30 % of $ 388,000       $ 116,400

Purchases for January 2019 sales - 70 % of $ 196,000             $ 137,200

Total purchases for December 2018 on selling price             $ 253,600

Purchases  are 60 % of selling price - $ 253,600 * 60 %         $ 152,160

Payments for December purchases  25 %      (A)                 $    38,040          

Purchases for November 2018 sales - 30 % of $ 264,000       $    79,200

Purchases for December 2018 sales - 70 % of $ 388,000       $   137,200

Total purchases for November 2018 on selling price             $    216,400

Purchases  are 60 % of selling price - $ 216,400 * 60 %         $    129,840

Payments for November  purchases  75 %          (B)             $    97,380

Total payment for purchases in December 2018  (A) + (B)    $  135,420      

Answer 2

Budgeting is the act of estimating a company's future income and expenditures over a set period of time.

1) Budgeted cash collections for December 2018 from November 2018 Sales - $ 100,320

2) Budgeted total cash collections for January 2019 - $ 221,880

3)  Budgeted total cash payments for December 2018 - $ 135,420

Solution:-

Computation of cash collections for December 2018 from November 2018:-

Credit Sales for November 2018                                                   $ 264,000

Less: Un collectible sales - 5 % of credit sales                              $ (  13,200)

Collectible sales                                                                              $ 250,800

Percentage of collectible sales in month of sales- 60 %             $ (150,480)

Percentage of collectible sales in next month -Dec 18 - 40 % $ 100.320  

Computation of total cash collections for January 2019:-

Cash collections from December sales

Credit sales for December 2018              $ 388,000

Less 5 % Un collectible sales                   $ ( 19,400)

Collectible sales                                       $ 366,600

Collections in month subsequent to sale 40 % * $ 366,600      $  147,400    

Cash collections from January 2019 sales

Credit sales for January 2019                  $ 196,000

Less: 5 % UN collectible sales                   $(    9,800)

Collectible sales                                       $  186,200                      

Collections in month of sale 60 % * $ 186,200                          $    74,480

Total collections for January 2019                                            $ 221,880

Computation of cash payments for December 2018

Purchases for December 2018 sales - 30 % of $ 388,000       $ 116,400

Purchases for January 2019 sales - 70 % of $ 196,000             $ 137,200

Total purchases for December 2018 on selling price             $ 253,600

Purchases  are 60 % of selling price - $ 253,600 * 60 %         $ 152,160

Payments for December purchases  25 %      (A)                     $     38,040          

Purchases for November 2018 sales - 30 % of $ 264,000       $    79,200

Purchases for December 2018 sales - 70 % of $ 388,000       $   137,200

Total purchases for November 2018 on selling price              $    216,400

Purchases  are 60 % of selling price - $ 216,400 * 60 %         $    129,840

Payments for November purchases  75 %          (B)                $    97,380

Total payment for purchases in December 2018  (A) + (B)     $  135,420  

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