70.2K

Verified Solution

Link Copied!

Kat Ltd September balance sheet contains the following information: Cath Accounts receivable Alle for doubtful accounts Merchandise eventory $ 37,500 (dr) 126,000 (de) 2,000 (or) Management has designated $37.500 as the firm's minimum monthly cash balance. Other information about the firm and its operations is as follows: a Sales revenues of $350,000 $420,000 and $312,500 are expected for October, November, and December, respectively. All goods b. The collection pattern for accounts receivable is 60% in the month of sale, 39% in the month following the mouth of sale, and 1% uncollectible, which is set up as an allowance. c. Cost of goods sold is 60% of sales revenues Management's targetending balance of merchandise Inventory is 10% of the current month's budgeted cost of goods sold c. All accounts payable for inventory are paid in the month of purchase Other monthly expenses are $49.250, which includes $3.500 of depreciation and $2,000 of bad debt expense g. In the event of a shortfall, the company borrows money. In contrast, in the event of excess cash, the company invests in short term investments. Borrowings and investments are assumed to be made at the end of a month in increments of $6.250 Interest on borrowings is 10% per year payable every quarter on the accumulated amount of the loan similarly, Interest earned on Investments is 8% per year on the accumulated investments and is received every quarter Investments can be matured and the principal amount redeemed in June or December of a year 1 Required: 1. Prepare a merchandise purchases budget for October and November. Kat Ltd. Merchandise Purchases Budget October November December Total needs 2. Prepare the cash budgets for October and November including the effects of financing (borrowing or investing). Interest is earned or pald quarterly. (Any Repayments and interest should be indicated by a minus sign. Leave no cells blank- be certain to enter "0" wherever required.) Kat L Cash Budget October November Total cash available Deduct Disbursements Total disbursements Excess deficiency of cash Financing Investments Borrowings Ropayments Interest Total financing

Answer & Explanation Solved by verified expert

See Answer