The following data relate to the operations of Picanuy Corporation, a wholesale
ID: 2452481 • 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
$
6,100
Accounts receivable
$
40,500
Inventory
$
10,430
Buildings and equipment, net
$
115,900
Accounts payable
$
32,410
Capital stock
$
100,000
Retained earnings
$
40,520
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)
$67,500
January
$74,500
February
$80,200
March
$94,100
April
$56,100
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, $12,250; rent, $2,200; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $2,740 for the quarter and includes depreciation on new assets acquired during the quarter.
g.
Equipment will be acquired for cash: $7,200 in January and $8,090 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.
Schedule of Expected Cash Collections
January
February
March
Quarter
Cash sales
$29,800
$32,080
$37,640
$22,440
Credit sales
40,500
48,120
56,460
33,660
Total collections
$70,300
$80,200
$94,100
$56,100
Merchandise Purchases Budget
January
February
March
Quarter
Budgeted cost of goods sold
$52,150
$56,140
$59,500
$167,790
Add desired ending inventory
11,228
11,900
7,700
30,828
Total needs
63,378
68,040
67,200
198,618
Less beginning inventory
10,430
11,228
11,900
11,000
Required purchases
$52,948
$56,812
$55,300
$187,618
Budgeted cost of goods sold for January = $74,500 sales × 70% = $52,150.
Add desired ending inventory for January = $80,200 × 70% × 20% = $11,228
Schedule of Expected Cash Disbursements—Merchandise Purchases
January
February
March
Quarter
December purchases
$32,410.00
$0.00
$0.00
$32,410.00
January purchases
$13,237.00
$39,711.00
$0.00
$52,948.00
February purchases
$0.00
March purchases
$0.00
$0.00
Total disbursements
$45,647.00
$39,711.00
$0.00
$85,358.00
Schedule of Expected Cash Disbursements—Selling and Administrative Expenses
January
February
March
Quarter
Commissions
$12,250
$12,250
$12,250
$12,250
Rent
2,200
2,200
2,200
2,200
Other expenses
5,960
6,416
7,528
19,904
Total disbursements
$20,410
$20,866
$21,978
$34,354
Picanuy Corporation
Cash Budget
January
February
March
Quarter
Cash balance, beginning
6,100.00
Add cash collections
70,300.00
48,120.00
56,460.00
56,100.00
Total cash available
76,400.00
48,120.00
56,460.00
56,100.00
Less cash disbursements:
For inventory
45,647.00
For operating expenses
20,410.00
For equipment
7,200.00
Total disbursements
73,257.00
0.00
0.00
0.00
Excess (deficiency) of cash
3,143.00
48,120.00
56,460.00
56,100.00
Financing:
Borrowings
Repayments
Interest
Total financing
$0.00
$0.00
$0.00
$0.00
Cash balance, ending
$3,143.00
$48,120.00
$56,460.00
$56,100.00
Picanuy Corporation
Income Statement
For the Quarter Ended March 31
Sales
$248,800
Cost of goods sold:
Beginning inventory
Purchases
Goods available for sale
0
Ending inventory
0
Gross margin
248,800
Selling and administrative expenses:
Commissions
Rent
Depreciation
Other expenses
0
Net operating income
248,800
Interest expense
Net income
248,800
Picanuy Corporation
Balance Sheet
March 31
Assets
Current assets:
Cash
Account receivable
Inventory
Total current assets
0
Fixed assets-net
Total assets
$0
Liabilities and Stockholders’ Equity
Account payable
Bank loan payable
Stockholders' equity:
Capital stock
Retained earnings
0
Total liabilities and stockholders’ equity
$0
The following data relate to the operations of Picanuy Corporation, a wholesale distributor of consumer goods:
Explanation / Answer
Answer:
*For jan sales: $74500 sales × 70% cost ratio = $52150
†$56140 × 20% = $11228
Sales 74500 80200 94100 56100 Schedule of Expected Cash Collections Particulars Jan Feb March Quarter Cash Sales 29800 32080 37640 99520 Credit Sales 40500 44700 48120 133320 Total collections 70300 76780 85760 232840Related Questions
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