Essay on Chester & Wayne

998 Words4 Pages
Case: Chester & Wayne Chester & Wayne is a regional food distribution company. Mr. Chester, CEO, has asked for assistance with preparing cash-flow information for the last three months of this year. The selected accounts from an interim balance sheet dated September 30, have the following balances: Cash $142,100 Accounts payable $354,155 Marketable securities $200,000 Other payables $53,200 Accounts receivable $1,012,500 Inventories $150,388 Mr. Wayne, CFO, provided the following information based on experience and management policy. All sales are credit sales and are billed the last day of the month of sale. Customers paying within 10 days of the billing date may take a 2 percent cash discount.…show more content…
Any excess amounts go first to repayment of short-term borrowings and then to investment in marketable securities. When cash is needed to reach the minimum balance, the company policy is to sell marketable securities before borrowing. Cash Budget for each Month of the Fourth Quarter Chester & Wayne October November December Total Cash budget Cash collection 40% after 2% discount $308,700 $324,106 $340,334 $973,140 25% without discount $196,875 $206,700 $217,050 $620,625 30% in next month $225,000 $236,250 $206,700 $667,950 Renting of warehouse $24,000 $24,000 Sell of marketable securities $7,351 $192,649 $200,000 Bank borrowing $29,750 $53,393 $83,143 Total collection $761,926 $989,455 $817,477 $2,568,858 less payments 60% of purchases and other $429,871 $452,875 $470,561 $1,353,307 40% of purchases and other $354,155 $286,580 $301,916 $942,651 Equipment $250,000 $250,000 Dividend $45,000 $45,000 Total payments $784,026 $989,455 $817,477 $2,590,958 Surplus or Deficit ($22,100) $0 $0 ($22,100) Opening balance $142,000 $120,000 $120,000 $142,000 Closing balance $120,000 $120,000 $120,000 $120,000 Chester & Wayne October November December Total Cash budget Cash collection 40% after 2% discount $308,700 $324,106 $340,334 $973,140 25% without discount $196,875 $206,700 $217,050 $620,625 30% in next month $225,000 $236,250
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