Compute the budgeted cash disbursements during June. Mast Corporation seeks your

ID: 2523998 • Letter: C

Question

Compute the budgeted cash disbursements during June. Mast Corporation seeks your assistance in developing cash and other budget information for May, June and July. At April 30, the company had cash of $11,000, accounts receivable of $893,000, inventories of $130,800, and accounts payable of $42,628. The budget is to be based on the following assumptions. . Each month's sales are billed on the last day of the month. . Customers are allowed a 2 percent discount if payment is made within 10 days after the billing date. Receivables are recorded in the accounts at their gross amounts (not net of discounts). . The bilings are collected as follows: 70 percent within the discount p the month, and 12 percent by the end of the following month. Three percent is uncollectible. Purchase data are as follows. . Of all purchases of merchandise and selling, general, and administrative expenses, 55 percent is Phe inume of tn ts in eah mnth eding oenty eas 420 percent of the next month's units . The number of units in each month's ending inventory equals 120 percent of the next month's units of sales . The cost of each unit of inventory is $10. . Selling. general, and administrative expenses, of which $4,000 is depreclation, equal 20 percent of the current month's sales . Actual and projected sales follow: Dollars Units $162,000 10,800 211,500 14,100 163,500 10,900 201,000 13,400 195 000 13,000 16,000 13,200 March April May June July August

Explanation / Answer

Mast Corporation

Computation of budgeted cash disbursements during June:

Payment for June Purchases

$71,060

Payment for May purchases

$62,550

Payment for June Expenses

$19,910

Payment for May Expenses

$12,915

Cash disbursements during June

$166,435

June Purchases –

Sales + ending inventory – beginning inventory

June Sales = 13,400 units

Ending inventory = 120% of next month’s units of sales = 120% of 13,000 = 15,600 units

Beginning inventory = 120% of 13,400 units = 16,080

Hence, June purchases = 13,400 + 15,600 – 16,080 = 12,920 units

Budgeted purchases in June at $10 per unit = 12,920 x $10 = $129,200

Payment for June Purchases = 55% of $129,200 = $71,060

May Purchases –

Sales + ending inventory – beginning inventory

Sales = 10,900 units in May

Ending inventory = 120% of next month’s units of sales = 120% of 13,400 = 16,080 units

Beginning inventory = 120% of 10,900 units = 13,080 units

Hence May Purchases = 10,900 + 16,080 – 13,080 = 13,900 units

Budgeted purchases at $10 per unit = 13,900 x $10 = $139,000

Payment for May purchases in June = 45% of 139,000 = $62,550

Payment for June expenses –

Selling, general and administrative expenses (including dep) for June = 20% of June Sales

June sales = $201,000

20% of 201,000 = $40,200

Less: depreciation (non-cash expense) $4,000

Payment for June Expenses = $36,200 x55% = $19,910

Payment for May Expenses –

Selling, general and administrative expenses (including dep) for May = 20% of May Sales

May sales = $163,500

20% of $163,500 = $32,700

Less: non-cash expense, depreciation $4,000

Cash expenses in May = $28,700

Payment for May expenses in June =45% of 28,700 = $12,915