All sales are on account. 60% of customer accounts are collected in the month of sale; 35% are collected in the following month. Uncollectibles amounting to 5% of sales are anticipated, and management believes that only 20% of the accounts outstanding on December 31, 20x0, will be recovered and that the recovery will be in January 20x1. 70% of the merchandise purchases are paid for in the month of purchase; the remaining 30% are paid for in the month after acquisition.
The December 31, 20x0, balance sheet disclosed the following selected figures: cash, $20,000; accounts receivable, $55,000; and accounts payable, $22,000.
Mary and Kay, Inc., maintains a $20,000 minimum cash balance at all times. Financing is available (and retired) in $1,000 multiples at an 8% interest rate, with borrowings taking place at the beginning of the month and repayments occurring at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid at that time.
Additional data:
January February March
Sales revenue $530,000 $620,000 $635,000
Merchandise purchases 350,000 380,000 500,000
Cash operating costs 101,000 80,000 143,000
Proceeds from sale
of equipment - - 23,000
Required:
1. Prepare a schedule that discloses the firm's total cash collections for January through March.
2. Prepare a schedule that discloses the firm's total cash disbursements for January through March.
3. Prepare a schedule that discloses the firm's cash needs, if any, for January through March.