Commodore Company, a retailer, has developed the sales budget for the next six months of its rolling budget. Gross profit has averaged 35 percent of sales over the last 3 months and this trend is expected to continue. Purchases of merchandise are made a month before needed and are paid 60 percent in the month of purchase and 40 percent the following month. Wages, estimated at 10 percent of sales, are paid in the month of sale while operating expenses, 15 percent of sales, are paid in the month of the sale. There is a $63,000 balance in Accounts Payable on March 31, all of which is paid in April.

Month Sales

March $350,000 Actual

April 300,000

May 280,000

June 320,000

July 260,000

August 280,000

Required: Prepare a schedule of cash disbursements for April, May, and June.

Our group is getting two different answers:

Inventory Purchases: April May June 2nd Qtr
Cash Payments for purchases (during current month) 117,000 109,200 124,800 351,000
Cash Payments for purchases (during preceding month) 91,000 78,000 72,800 241,800
Total Cash Payments (inventory purchases) 208,000 187,200 197,600 592,800
Other Expenses:
Wages 30,000 28,000 32,000 90,000
Operating Expenses 45,000 42,000 48,000 135,000
Accounts Payable 63,000 63,000
Total Cash Payments (other expenses) 138,000 70,000 80,000 288,000
Total Cash Disbursements 346,000 257,200 277,600 880,800



Schedule of Cash Disbursement Diane’s work sheet
April May June Totals
Accounts payable $ 63,000 $ - $ - $ 63,000
April purchases payment $ 78,000 * $ - $ - $ 78,000
May purchases payment $ 109,200 * $ 72,800* $ - $ 182,000
June purchases Payment $ - $ 124,800 $ 83,200 $ 208,000
July purchases payment $ - $ - $ 101,400 $ 101,400
Payment for wages $ 30,000 $ 28,000 $ 32,000 $ 90,000
Payment for operating expenses $ 45,000 $ 42,000 $ 48,000 $ 135,000
Totals $ 325,200 $ 267,600 $ 264,600 $ 857,400

*300000x65%x40%=78000
Bought in March paid 60% March and paid 40% in April

280000x65%x60%=109200
*Bought in April and paid 60% in April

280000x65%x40%=72800
*Bought in April and 40% paid in May