Janus Products, Inc., is a merchandising company that sells binders, paper, and

ID: 2448448 • Letter: J

Question

Janus Products, Inc., is a merchandising company that sells binders, paper, and other school supplies. The company is planning its cash needs for the third quarter. In the past, Janus Products has had to borrow money during the third quarter to support peak sales of back-to-school materials, which occur during August. The following information has been assembled to assist in preparing a cash budget for the quarter:

Credit sales are collected over a three-month period with 15% collected in the month of sale, 60% in the month following sale, and 25% in the second month following sale. May sales totaled $46,000, and June sales totaled $34,000.

Inventory purchases are paid for within 15 days. Therefore, 50% of a month’s inventory purchases are paid for in the month of purchase. The remaining 50% is paid in the following month. Accounts payable for inventory purchases at June 30 total $12,600.

The company maintains its ending inventory levels at 90% of the cost of the merchandise to be sold in the following month. The merchandise inventory at June 30 is $29,700.

The cash balance on June 30 is $9,000; the company must maintain a cash balance of at least this amount at the end of each month.

The company has an agreement with a local bank that allows it to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $40,000. 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.

Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total.

Prepare the following for merchandise inventory:

A merchandise purchases budget for July, August, and September.

A schedule of expected cash disbursements for merchandise purchases for July, August, and September and for the quarter in total.

Prepare a cash budget for July, August, and September and for the quarter in total. (Cash deficiency, repayments and interest should be indicated by a minus sign.)

A schedule of expected cash disbursements for merchandise purchases for July, August, and September and for the quarter in total. (Leave no cells blank - be certain to enter "0" wherever required.)

a. Budgeted monthly absorption costing income statements for July–October are as follows:

Explanation / Answer

All values given in $

Schedule of Expected Cash Collections

All values given in $

Schedule of Expected Cash Collections

July August September Quarter - Total Cash sales 9400 18400 14800 42600 Sales on account: May 11500 11500 June 20400 8500 28900 July 5640 22560 9400 37600 August 11040 44160 55200 September 8880 8880 Total cash collections 46940 60500 77240 184680 Merchandise Purchases Budget July August September Budgeted cost of goods sold 33000 51000 39000 (Click to select)AddDeduct: (Click to select)Ending inventoryBeginning inventory -29700 -45900 -35100 Total needs 3300 5100 3900 (Click to select)DeductAdd: (Click to select)Ending inventoryBeginning inventory 45900 35100 32400 Required inventory purchases 49200 40200 36300 Schedule of Expected Cash Disbursements July August September Quarter - Total Accounts payable, June 30 12600 12600 July purchases 24600 24600 49200 August purchases 20100 20100 40200 September purchases 18150 18150 Total cash disbursements 37200 44700 38250 120150 3. Janus Products, Inc. Cash Budget For the Quarter Ended September 30 July August September Quarter - Total Cash balance, beginning 9000 9140 9440 9000 Add collections from sales 46940 60500 77240 184680 Total cash available 55940 69640 86680 212260 Less disbursements: For inventory purchases 37200 44700 38250 120150 For selling expenses 6800 10300 9100 26200 For administrative expenses 3800 7200 7200 18200 For land 5000 5000 For dividends 1000 1000 Total disbursements 52800 62200 55550 170550 Excess (deficiency) of cash available over disbursements 3140 7440 31130 41710 Financing: Borrowings 6000 2000 8000 Repayment -8000 -8000 Interest -140 -140 Total financing 6000 2000 -8140 -140 Cash balance, ending 9140 9440 22990 22990

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Janus Products, Inc., is a merchandising company that sells binders, paper, and

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Janus Products, Inc., is a merchandising company that sells binders, paper, and

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