Romeo Lindo, the management accountant at “Woods Household Supplies” is in the process of planning the company’s cash needs for the last quarter of 2016. Extracts from the sales and purchases budgets are as follows:
Month
2016
Cash
Sales
Sales
On
Account
Purchases
On
Account
August
$71,000
$520,000
$420,000
September
$55,500
$640,000
$400,000
October
$38,400
$760,000
$520,000
November
$36,500
$680,000
$440,000
December
$56,750
$850,000
$540,000
(i) An analysis of the records shows that trade receivables (accounts receivable) are settled according to the following credit pattern, in accordance with the credit terms 4/30, n90:
50% in the month of sale
40% in the first month following the sale
10% in the second month following the sale
(ii) Accounts payable are settled as follows, in accordance with the credit terms 5/30, n60:
75% in the month in which the inventory is purchased
25% in the following month
(iii) In the month of November, an old motor vehicle, with net book value of $95,000, will be sold for cash to an employee at a profit of $45,000. The employee will be allowed to pay a deposit equal to 50% of the amount in November and the balance will be settled in two equal amounts in December 2016 and January 2017.
a)) Prepare a cash budget, with a total column, for the quarter ending September 30.
Could you please show workings?