AM is a trading
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AM is a trading entity. Purchases are on credit, with 70% paid in the month following the date of
purchase and 30% paid in the month after that.
Sales are partly on credit and partly for cash. Customers who receive credit are given 30 days to
pay. On average 60% pay within30 days, 30% pay between 30 and 60 days and 5% pay between
60 and 90 days. The balance is written off as irrecoverable. Other
are paid within the month incurred.
AM plan to purchase new equipment at the end of June 2015, the expected cost of which is
P250,000. The equipment will be purchases on 30 days credit, payable at the end of July.
The cash balance on 1 May 2015 is P96,000.
The actual/budgeted figures for the six month to July 2015 were:
ACTUAL | BUDGETED | |||||
FEB P000 | MARCH P000 | APRIL P000 | MAY P000 | JUNE P000 | JULY P000 | |
Credit sales | 100 | 100 | 110 | 110 | 120 | 120 |
Cash sales | 30 | 30 | 35 | 35 | 40 | 40 |
Credit Purchases | 45 | 50 | 50 | 55 | 55 | 60 |
other overhead expenses | 40 | 40 | 40 | 50 | 50 | 50 |
Required:
a. Prepare a monthly
b. Assess the likelihood of AM being able to pay for the equipment when it falls due.
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Solved in 3 steps
- A company has a turnover of SEK 15,000,000. The supplier credit period is on average 28 days. The annual purchases of goods etc. amounts to SEK 9,000,000. Accounts receivable amount to SEK 1,250,000 on average. Cash and cash equivalents account for 6% of sales. The inventory averages SEK 1,500,000. The management's goal is to reduce the working capital requirement by SEK 250,000. The finance department believes that the goal can be achieved by reducing inventory to an average of SEK 1,400,000, extending the average supplier credit period by two days and shortening the average customer credit period by 3 days. Is it true? Points require both motivation and that all calculations are reported.Question Hare, Inc., had a cost of goods sold of $43,921. At the end of the year, the accounts payable balance was $7,943. How long on average did it take the company to pay off its suppliers during the year? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)A company began operations in March with cash and common stock of $36,000. The company made $582,000 in net income in its first month. It performed print jobs for customers and billed these customers $900,000. The company collected half of its receivables by the end of the month. The company had a cost of goods sold of $162,000 paid for in cash and $6,000 inventory left over at the end of the month. The company's employees earned wages but those are not paid until the first of April. This was the company’s only liability. How would I calculate the income statement and balance sheet for the end of March?
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