er 8 Graded Problems Saved Help en supplies. Management is planning its cash nee
ID: 2577996 • Letter: E
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er 8 Graded Problems Saved Help en supplies. Management is planning its cash needs for the second quarter. The company usually has to borrow money has been assembled to assist in preparing a cash budget for the quarter: during this quarter to support peak sales of lawn care equipment, which occur during May. The following information a. Budgeted monthly absorption costing income statements for April-July are: Apr Sales Cost of goods sold Gross margin Selling and administrative expenses: 600,000 900,000 500,000 $400,000 420,000 630,000 350,000 280,000 180,000 270,000 150,000 120,000 ook Selling expense 79,000 120,000 62,000 51,000 38,000 89,000 56,000 98,000 47,000 31,000 rint Administrative expense* Total selling and administrative expenses Net operating income 45,000 52,000 124,000 172,000 103,000 41,000 "Includes $20,000 of depreciation each month. b. Sales are 20% for cash and 80% on account. c. Sales on account are collected over a three month period with 10% collected in the month of sale: 70% collected in the first month following the month of sale, and the remaining 20% collected in the second month following the month of sale, February's sales totaled $200,000, and March's sales totaled $300,000 d. 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 at March 31 for inventory purchases during March total $126,000. e. Each month's ending inventory must equal 20% of the cost of the merchandise to be sold in the following month. The merchandise inventory at March 31 is $84,000. f Dividends of $49,000 will be declared and paid in April. g. Land costing $16,000 will be purchased for cash in May. h. The cash balance at March 31 Is $52,000; the company must maintain a cash balanc L The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of at least $40,000 at the end of each month. each month, up to a total loan balance of $200,000. 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.Explanation / Answer
1 Sales budget April May June Quarter Sales 600000 900000 500000 2000000 Cash sales 120000 180000 100000 400000 Credit sales 480000 720000 400000 1600000 2 Budgeted Cash receipt April May June Quarter Cash sales 120000 180000 100000 400000 February sales 32000 32000 March sales 168000 48000 216000 April Sales 48000 336000 96000 480000 May sales 72000 504000 576000 June sales 40000 40000 Total collection 368000 636000 740000 1744000 3 Purchase budget April May June Next month sales 630000 350000 280000 Ending inventory 20% 126000 70000 56000 Add Sales 420000 630000 350000 Less Beginning inventory 84000 126000 70000 Required purchase 462000 574000 336000 4 Particulars April May June Quarter Accounts payable 126000 126000 Payment for April 231000 231000 462000 Payment for May 287000 287000 574000 Payment for June 168000 168000 Total payments 357000 518000 455000 1330000 Cash budget April May June Quarter Beginning cash balance 52,000 40,000 40,000 52,000 Add Cash collections 368000 636000 740000 1744000 Total collections 4,20,000 6,76,000 7,80,000 17,96,000 Less Cash disbursements Payment of material 357000 518000 455000 1330000 Selling expense 79000 120000 62000 261000 Administrative expense 25000 32000 21000 78000 Land purchased 16000 16000 Dividend paid 49000 49000 Total payments 510000 686000 538000 1734000 cash balance -90,000 -10,000 2,42,000 62,000 Financing Loan taken 130000 50000 180000 Loan repaid 180000 180000 Interest paid 4900 4900 Ending cash balance 40,000 40,000 57,100 57,100
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