The following data relate to the operations of Picanuy Corporation, a wholesale

Question

The following data relate to the operations of Picanuy Corporation, a wholesale distributor of consumer goods:

Sales are 40% for cash and 60% on credit. Credit sales are collected in the month following sale. The accounts receivable at December 31 are the result of December credit sales.

One-quarter of a month’s inventory purchases is paid for in the month of purchase; the other three-quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory.

Monthly expenses are as follows: commissions, $11,640; rent, $1,900; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $5,430 for the quarter and includes depreciation on new assets acquired during the quarter.

Management would like to maintain a minimum cash balance of $5,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $50,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

1. Compute the following schedule

Complete the following:

Add desired ending inventory for January = $80,300 × 70% × 20% = $11,242.

3. Compute the following schedule

4.

Complete the following cash budget: (Borrow and repay in increments of $1,000. Cash deficiency, repayments and interest should be indicated by a minus sign. Round your answers to 2 decimal places.)

$6,500.00

Prepare an absorption costing income statement for the quarter ended March 31.

226,820

Prepare a balance sheet as of March 31.

The following data relate to the operations of Picanuy Corporation, a wholesale distributor of consumer goods:

Explanation / Answer

PICANUY CORPORATION December Sales Budget Quarter actuals Jan Feb March Total April Sales 63400 77500 80300 91000 248800 58800 Credit sales 46500 48180 54600 149280 Cash sales 31000 32120 36400 99520 Schedule of expected cash collections cash sales 31000 32120 36400 99520 credit sales 38040 46500 48180 132720 69040 78620 84580 232240 merchandise purchase budget cogs 54250 56210 63700 174160 41160 ending stock 11242 12740 8232 8232 65492 68950 71932 182392 opening stock 10850 11242 12740 10850 purchases 54642 57708 59192 171542 purchase payments december 32740 32740 january 13661 40982 54642 february 14427 43281 57708 march 14798 14798 44394 46401 55409 58079 159888 cash disbursements-selling and admn commission 11640 11640 11640 34920 rent 1900 1900 1900 5700 other exps 6200 6424 7280 19904 total 19740 19964 20820 60524 CASH BUDGET opening bal 6500 5600 5347 6500 collections 69040 78620 84580 232240 total available 75540 84220 89927 238740 cash payments inventory 46401 55409 58079 159888 operating exp 19740 19964 20820 60524 equipment 6800 8500 0 15300 total payments 72941 83873 78899 235712 excess/def 2600 347 11028 3028 financing borrowing 3000 5000 0 8000 repayments 0 -5000 -5000 interest 0 -110 -110 total financing 3000 5000 -5110 2890 closing cash 5600 5347 5918 5918 INCOME STATEMENT FOR THE QUARTER sales 248800 cogs beginning inv 10850 purchases 171542 182392 closing 8232 174160 gross margin 74640 selling.admn commn 34920 rent 5700 depn 5430 other exp 19904 65954 Operating Income 8686 less interest 110 net income 8576 BALANCE SHEET ASSETS: current assets: cash 5918 inventory 8232 accts receivable 54600 68750 fixed assets net 125470 total assets 194220 LIABILITIES: Current liabilities: accts payable 44394 bank loan 3000 47394 Equity: common stock 100000 retained earnings 46826 146826 total liabilities & equity 194220

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