The following data relate to the operations of Picanuy Corporation, a wholesale
ID: 2452259 • Letter: T
Question
The following data relate to the operations of Picanuy Corporation, a wholesale distributor of consumer goods: Current assets as of December 31: Cash $ 6,300 Accounts receivable $ 38,280 Inventory $ 10,640 Buildings and equipment, net $ 119,700 Accounts payable $ 32,480 Capital stock $ 100,000 Retained earnings $ 42,440 a. The gross margin is 30% of sales. (In other words, cost of goods sold is 70% of sales.) b. Actual and budgeted sales data are as follows: December (actual) $63,800 January $76,000 February $87,100 March $88,500 April $62,900 c. 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. d. Each month’s ending inventory should equal 20% of the following month’s budgeted cost of goods sold. e. 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. f. Monthly expenses are as follows: commissions, $14,000; rent, $1,350; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $2,870 for the quarter and includes depreciation on new assets acquired during the quarter. g. Equipment will be acquired for cash: $6,900 in January and $8,410 in February. h. 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: Using the data above: 1. Complete 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 yol a swers to 2 decima places.) Picanuy Corporatiorn Cash Budget January February- March Quarter Cash balance, beginning Add cash collections Total cash available Less cash disbursements: 6,300.00 68,680.00 74,980.00 For inventory For operating expenses For equipment 46,168.50 21,430.00 6,900.00 74,498.50 481.50 Total disbursements Excess (deficiency) of cash Financing Borrowings Repayments interest Total financing Cash balance endingExplanation / Answer
Picanuy Corporation
Cash Budget
Jan
Feb
Mar
Quarter
Cash balance (Beginning)
6,300
5,482
5,837
6,300
+ Cash collections (Cash sales current month+ credit sales Prior month)
68,680
80,440
87,660
236,780
Total Cash available
74,980
85,922
93,497
243,080
Less: Cash disbursements:
For Inventory
46,169
56,357
60,466
162,992
For Operating expenses
21,430
22,318
22,430
66,178
For Equipment
6,900
8410
0
15,310
Total disbursements
74,499
87,085
82,896
244,480
Excess / (Deficiency) of a Cash
482
(1,164)
10,601
(1,400)
Financing
Borrowing
5,000
7000
0
12,000
Repayments (see note)
-
-
5,240
5,240
Interest
50
120
70
240
Cash balance (ending)
5,482
5,837
5,361
5,361
Balance sheet as of March 31
Current Assets
Cash
5,361
Accounts receivable
53,100
Inventory
8,806
Total Current Assets
67,267
Fixed Assets
Building & Equipment
119,700
+Additions
15,310
- Depreciation
2,870
Net Fixed ASSETS
132,140
Total Assets
199,407
Current Liabilities
Accounts Payable
43,775
Bank loan
7,000
Total current liabilities
50,775
Equity
Capital stock
100,000
Retained earnings
42,440
+ Net income
6,192
48,632
Total equity
148,632
Total liabilities and equity
199,407
Workings:
Accounts receivable = Credit sales of March
Accounts payable = 75% of March purchases
Bank loan repayment:
Minimum balance required is 5,000
Excess budget in March = 10,601
Total loan taken in Jan and Feb = 5,000+7,000 = 12,000
Repayment can be made to the extent of 5,000 + plus interest for three months = 5,000+240 =5,240
Picanuy Corporation
Cash Budget
Jan
Feb
Mar
Quarter
Cash balance (Beginning)
6,300
5,482
5,837
6,300
+ Cash collections (Cash sales current month+ credit sales Prior month)
68,680
80,440
87,660
236,780
Total Cash available
74,980
85,922
93,497
243,080
Less: Cash disbursements:
For Inventory
46,169
56,357
60,466
162,992
For Operating expenses
21,430
22,318
22,430
66,178
For Equipment
6,900
8410
0
15,310
Total disbursements
74,499
87,085
82,896
244,480
Excess / (Deficiency) of a Cash
482
(1,164)
10,601
(1,400)
Financing
Borrowing
5,000
7000
0
12,000
Repayments (see note)
-
-
5,240
5,240
Interest
50
120
70
240
Cash balance (ending)
5,482
5,837
5,361
5,361
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