Mary and Kay, Inc. Cash Budget

Mary and Kay, Inc. a distributor of cosmetics throughout Florida, is in the process of assembling a cash budget for the first quarter of 20×1. The following information has been extracted from the company’s accounting records:

All sales are on account. Sixty percent of customer accounts are collected in the month of sale; 35 percent are collected in the following month. Uncollectibles amounting to 5 percent of sales are anticipated and management believes that only 20 percent of the accounts outstanding on Dec, 31, 20×0 will be recovered and that the recovery will be in January 20×1.

Seventy percent of the merchandise purchase are paid for in the month of purchase; the remaining 30 percent are paid for in the month after acquisition.

The December 31, 20×0 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 41,000 multiples at an 8 percent 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:

Sales revenue $150,000 in Jan, $180,000 in Feb and $185,000 in Mar
Merchandise purchases 90,000 in Jan, 100,000 in Feb and 140,000 in Mar
Cash operating costs 31,000 in Jan, 24,000 in Feb, 45,000 in Mar
Proceeds from sale of equipment _ in Jan, _in Feb and 5,000 in Mar

Required:

1. Prepare a schedule that discloses the firm’s total cash collection for Jan-Mar
2. Prepare a schedule that discloses the firm’s total cash disbursements for Jan-Mar
3. Prepare a schedule that discloses the firm’s cash needs, if any for Jan -Mar