Agua Frio is a distributor of bottled water. For each of the items, compute the amount of cash receipts or payments Agua Frio will budget for September. The solution to one item may depend on the answer to an earlier item.
a. Management expects to sell equipment that cost $17,000 at a gain of $3,000. Accumulated depreciation on this equipment is $7,000.
b. Management expects to sell 7,400 cases of water in August and 9,600 cases in September. Each case sells for $13. Cash sales average 30% of total sales, and credit sales make up the rest. Three-fourths of credit sales are collected in the month of the sale, with the balance collected the following month.
c. The company pays rent and property taxes of $3,900 each month. Commissions and other selling expenses average 30% of sales. Agua Frio pays one-half of commissions and other selling expenses in the month incurred, with the balance paid the following month.
This question was answered on: Jul 11, 2017
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