Essay on Chester & Wayne

998 Words Jun 6th, 2013 4 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.
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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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