Accounting – Cornerstone Exercise 9-30 (Algorithmic)

1.

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Cornerstone Exercise 9-30 (Algorithmic)
Preparing a Schedule of Cash Collections on Accounts Receivable

Kailua and Company is a legal services firm. All sales of legal services are billed to the client (there are no cash sales). Kailua expects that, on average, 20 percent will be paid in the month of billing, 50 percent will be paid in the month following billing, and 25 percent will be paid in the second month following billing. For the next five months, the following sales billings are expected:

May $  84,000
June 100,800
July 77,000
August 87,600
September 90,000


 

Prepare a schedule showing the cash expected in payments on accounts receivable in August and in September. If an amount is zero, enter “0”.

Kailua and Company Schedule
 

August

September

June:

   
 
$
 

x

 

%
$
 


 


July:

   
 
$
 

x

 

%

 

 
 
$
 

x

 

%
 
$
 


August:

   
 
$
 

x

 

%

 

 
 
$
 

x

 

%
 

 


September:

   
 
$
 

x

 

%

 


 


Total

$
 

$
 

 



2.
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Cornerstone Exercise 9-31 (Algorithmic)
Preparing an Accounts Payable Schedule

Wight Inc. purchases raw materials on account for use in production. The direct materials purchases budget shows the following expected purchases on account:

April $373,800
May 411,100
June 415,900

Wight typically pays 20 percent on account in the month of billing and 80 percent the next month.

1. How much cash is required for payments on account in May?
$     _________________  

2. How much cash is expected for payments on account in June?
$     _________________  



3.



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Cornerstone Exercise 9-32 (Algorithmic)
Preparing a Cash Budget

La Famiglia Pizzeria provided the following information for the month of October:

  1. Sales are budgeted to be $156,000. About 85 percent of sales are cash; the remainder are on account.
  2. La Famiglia expects that, on average, 70 percent of credit sales will be paid in the month of sale, and 28 percent will be paid in the following month.
  3. Food and supplies purchases, all on account, are expected to be $119,000. La Famiglia pays 25 percent in the month of purchase and 75 percent in the month following purchase.
  4. Most of the work is done by the owners, who typically withdraw $6,000 a month from the business as their salary. (The $6,000 is a payment in total to the two owners, not per person.) Various part-time workers cost $7,300 per month. They are paid for their work weekly, so on average 90 percent of their wages are paid in the month incurred and the remaining 10 percent in the next month.
  5. Utilities average $5,950 per month. Rent on the building is $4,100 per month.
  6. Insurance is paid quarterly; the next payment of $1,000 is due in October.
  7. September sales were $181,500 and purchases of food in September equaled $130,000.
  8. The cash balance on October 1 is $2,147.
If required, round your answers to the nearest dollar.


1.  Calculate the cash receipts expected in October.

$     _________________  

2.  Calculate the cash needed in October to pay for food purchases.
$     _________________  



 

3.  Prepare a cash budget for the month of October. If required, round to the nearest dollar.

La Famiglia Pizzeria
Cash budget
For the month of October

Beginning balance

 
$
 


Cash receipts

 

 


Cash available

 
$
 


Less:

   

Payments for food purchases

 
$
 


Owners’ draw

 

 


Workers’ wages

   
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