Score:
10/10
Points
100
%
1.
Award: 5 out of 5.00 points
Mary and Kay, Inc., a distributor of cosmetics throughout Florida, is in the process of assembling a cash budget for the first quarter of 20×1. The following information has been extracted from the company's accounting records:
• All sales are on account. Sixty percent of customer accounts are collected in the month of sale; 35 percent are collected in the following month. Uncollectibles amounting to 5 percent of sales are anticipated, and management believes that only 20 percent of the accounts outstanding on December 31, 20x0, will be recovered and that the recovery will be in January 20×1. • Seventy percent of the merchandise purchases are paid for in the month of purchase; the remaining 30 percent are paid for in the month after acquisition. • The December 31, 20x0, balance sheet disclosed the following selected figures: cash, $20,000; accounts receivable, $55,000; and accounts payable, $22,000. • Mary and Kay, Inc. maintains a $20,000 minimum cash balance at all times. Financing is available (and retired) in $1,000 multiples at an 8 percent interest rate, with borrowings taking place at the beginning of the month and repayments occurring at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid at that time. • Additional data:
Sales revenue Merchandise purchases Cash operating costs Proceeds from sale of equipment
January $150,000 90,000 31,000 —
February March $180,000 $185,000 100,000 140,000 24,000 45,000 — 5,000
Required: 1. Prepare a schedule that discloses the firm's total cash collections for January through March. (Leave no cells blank be certain to enter "0" wherever required. Omit the "$" sign in your response.)
January Collection of accounts receivable: $ 11,000 Collection of January sales 90,000 Collection of February sales 0 Collection of March sales 0 Sale of equipment 0 Total cash collections $ 101,000
February $ 0 52,500 108,000 0 0
$ 160,500
March $ 0 0 63,000 111,000 5,000
$ 179,000
2. Prepare a schedule that discloses the firm's total cash disbursements for January through March. (Leave no cells blank be certain to enter "0" wherever required. Omit the "$" sign in your response.)
Payment of accounts payable Payment of January purchases Payment of February purchases Payment of March purchases Cash operating costs Total cash disbursements
January $ 22,000 63,000 0 0 31,000 $ 116,000
February $ 0 27,000 70,000 0 24,000
$ 121,000
March $ 0 0 30,000 98,000 45,000
$ 173,000
3. Prepare a schedule that discloses the firm's cash needs, if any, for January through March. The schedule should present the following information in the order cited: Beginning cash balance, total receipts (from requirement (1)), total payments (from requirement (2)), the cash excess (deficiency)
before financing, borrowing needed to maintain minimum balance, loan principal repaid, loan interest paid, and ending cash balance. (Leave no cells blank be certain to enter "0" wherever required. Amounts to be deducted should be indicated by a minus sign. Omit the "$" sign in your response.) Beginning cash balance Total receipts Subtotal Less: Total disbursements Cash excess (deficiency) before financing Financing: Borrowing to maintain $20,000 balance Loan principal repaid Loan interest paid Ending cash balance
January $ 20,000 101,000 $ 121,000 116,000 $ 5,000
February $ 20,000 160,500
$ 180,500 121,000
March $ 44,300 179,000
$ 223,300 173,000
50,300 0 0 0
$ 50,300
$ 59,500
15,000 0 0
0 15,000 200
$ 20,000
$ 44,300
References Worksheet
Learning Objective: 0902 Describe the similarities and differences in the operational budgets prepared by manufacturers, serviceindustry firms, merchandisers, and nonprofit organizations.
Learning Objective: 0904 Prepare each of the budget schedules that make up the master budget.
Mary and Kay, Inc., a distributor of cosmetics throughout Florida, is in the process of assembling a cash budget for the first quarter of 20×1. The following information has been extracted from the company's accounting records:
• All sales are on account. Sixty percent of customer accounts are collected in the month of sale; 35 percent are collected in the following month. Uncollectibles amounting to 5 percent of sales are anticipated, and management believes that only 20 percent of the accounts outstanding on December 31, 20x0, will be recovered and that the recovery will be in January 20×1. • Seventy percent of the merchandise purchases are paid for in the month of purchase; the remaining 30 percent are paid for in the month after acquisition. • The December 31, 20x0, balance sheet disclosed the following selected figures: cash, $20,000; accounts receivable, $55,000; and accounts payable, $22,000. • Mary and Kay, Inc. maintains a $20,000 minimum cash balance at all times. Financing is available (and retired) in $1,000 multiples at an 8 percent interest rate, with borrowings taking place at the beginning of the month and repayments occurring at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid at that time.
• Additional data:
Sales revenue Merchandise purchases Cash operating costs Proceeds from sale of equipment
January $150,000 90,000 31,000 —
February March $180,000 $185,000 100,000 140,000 24,000 45,000 — 5,000
Required: 1. Prepare a schedule that discloses the firm's total cash collections for January through March. (Leave no cells blank be certain to enter "0" wherever required. Omit the "$" sign in your response.)
Collection of accounts receivable: Collection of January sales Collection of February sales Collection of March sales Sale of equipment Total cash collections
January $ 11,000 90,000 0 0 0 $
101,000
February $ 0 52,500 108,000 0 0 $
160,500
March $
0 0 63,000 111,000 5,000
$
179,000
2. Prepare a schedule that discloses the firm's total cash disbursements for January through March. (Leave no cells blank be certain to enter "0" wherever required. Omit the "$" sign in your response.)
Payment of accounts payable Payment of January purchases Payment of February purchases Payment of March purchases Cash operating costs Total cash disbursements
January $ 22,000 63,000 0 0 31,000 $
116,000
February $ 0 27,000 70,000 0 24,000 $
121,000
March $
0 0 30,000 98,000 45,000
$
173,000
3. Prepare a schedule that discloses the firm's cash needs, if any, for January through March. The schedule should present the following information in the order cited: Beginning cash balance, total receipts (from requirement (1)), total payments (from requirement (2)), the cash excess (deficiency) before financing, borrowing needed to maintain minimum balance, loan principal repaid, loan interest paid, and ending cash balance. (Leave no cells blank be certain to enter "0" wherever required. Amounts to be deducted should be indicated by a minus sign. Omit the "$" sign in your response.)
Beginning cash balance Total receipts Subtotal Less: Total disbursements Cash excess (deficiency) before financing Financing: Borrowing to maintain $20,000 balance Loan principal repaid Loan interest paid
January $ 20,000 101,000 $
$
121,000 116,000 5,000 15,000 0 0
February $ 20,000 160,500 $
$
180,500 121,000 59,500 0 15,000 200
March $ 44,300 179,000 $
223,300 173,000 50,300 0 0 0
Ending cash balance
$
20,000
$
44,300
Explanation: 1. Schedule of cash collections: Collection of accounts receivable: $55,000 × 20% Collection of January sales ($150,000): 60% in January; 35% in February Collection of February sales ($180,000): 60% in February; 35% in March Collection of March sales ($185,000): 60% in March; 35% in April
2. Schedule of cash disbursements: Payment of January purchases ($90,000): 70% in January; 30% in February Payment of February purchases ($100,000): 70% in February; 30% in March Payment of March purchases ($140,000): 70% in March; 30% in April
3. Loan interest paid in February: $15,000 × 8% × 2/12
$
50,300
2.
Award: 5 out of 5.00 points
Badlands, Inc. manufactures a household fan that sells for $40 per unit. All sales are on account, with 40 percent of sales collected in the month of sale and 60 percent collected in the following month. The data that follow were extracted from the company's accounting records.
• Badlands maintains a minimum cash balance of $30,000. Total payments in January 20×1 are budgeted at $390,000. • A schedule of cash collections for January and February of 20×1 revealed the following receipts for the period:
Cash Receipts January February From December 31 accounts receivable $216,000 From January sales 152,000 $228,000 From February sales 156,800
• March 20×1 sales are expected to total 10,000 units. • Finishedgoods inventories are maintained at 20 percent of the following month's sales. • The December 31, 20×0, balance sheet revealed the following selected figures: cash, $45,000; accounts receivable, $216,000; and finished goods, $44,700.
Required: 1. Determine the number of units that Badlands sold in December 20×0.
December sales
9,000
units
2. Compute the sales revenue for March 20×1. (Omit the "$" sign in your response.)
Sales revenue
$ 400,000
3. Compute the total sales revenue to be reported on Badlands’ budgeted income statement for the first quarter of 20×1. (Omit the "$" sign in your response.)
Total sales revenue
$ 1,172,000
4. Determine the accounts receivable balance to be reported on the March 31, 20×1, budgeted balance sheet. (Omit the "$" sign in your response.)
Accounts receivable balance
$ 240,000
5. Calculate the number of units in the December 31, 20×0, finishedgoods inventory.
Finishedgoods inventory
1,900
units
6. Calculate the number of units of finished goods to be manufactured in January 20×1.
9,560
Finished goods to be manufactured
units
7. Calculate the financing required in January, if any, to maintain the firm's minimum cash balance. (Omit the "$" sign in your response.)
Financing required
$ 7,000
References Worksheet
Learning Objective: 0902 Describe the similarities and differences in the operational budgets prepared by manufacturers, serviceindustry firms, merchandisers, and nonprofit organizations.
Learning Objective: 0904 Prepare each of the budget schedules that make up the master budget.
Badlands, Inc. manufactures a household fan that sells for $40 per unit. All sales are on account, with 40 percent of sales collected in the month of sale and 60 percent collected in the following month. The data that follow were extracted from the company's accounting records.
• Badlands maintains a minimum cash balance of $30,000. Total payments in January 20×1 are budgeted at $390,000. • A schedule of cash collections for January and February of 20×1 revealed the following receipts for the period:
Cash Receipts January February From December 31 accounts receivable $216,000 From January sales 152,000 $228,000 From February sales 156,800
• March 20×1 sales are expected to total 10,000 units. • Finishedgoods inventories are maintained at 20 percent of the following month's sales. • The December 31, 20×0, balance sheet revealed the following selected figures: cash, $45,000; accounts receivable, $216,000; and finished goods, $44,700.
Required: 1. Determine the number of units that Badlands sold in December 20×0.
December sales
9,000 units
2. Compute the sales revenue for March 20×1. (Omit the "$" sign in your response.)
Sales revenue
$
400,000
3. Compute the total sales revenue to be reported on Badlands’ budgeted income statement for the first quarter of 20×1. (Omit the "$" sign in your response.)
Total sales revenue
$
1,172,000
4. Determine the accounts receivable balance to be reported on the March 31, 20×1, budgeted balance sheet. (Omit the "$" sign in your response.)
Accounts receivable balance
$
240,000
5. Calculate the number of units in the December 31, 20×0, finishedgoods inventory.
1,900 units
Finishedgoods inventory
6. Calculate the number of units of finished goods to be manufactured in January 20×1.
Finished goods to be manufactured
9,560 units
7. Calculate the financing required in January, if any, to maintain the firm's minimum cash balance. (Omit the "$" sign in your response.)
Financing required
$
7,000
Explanation: 1. Sales are collected over a twomonth period, 40% in the month of sale and 60% in the following month. December receivables of $216,000 equal 60% of December's sales; thus, December sales total $360,000 ($216,000 ÷ .6). Since the selling price is $40 per unit, Badlands sold 9,000 units ($360,000 ÷ $40). 2. Since the company expects to sell 10,000 units, sales revenue will total $400,000 (10,000 units × $40). 3. Badlands collected 40% of February's sales in February, or $156,800. Thus, February's sales total $392,000 ($156,800 ÷ .4). Combining January sales ($152,000 + $228,000), February sales ($392,000), and March sales ($400,000), the company will report revenue of $1,172,000. 4. Sixty percent of March's sales will be outstanding, or $240,000 ($400,000 × 60%). 5. Finishedgoods inventories are maintained at 20% of the following month's sales. January sales total $380,000 ($152,000 + $228,000), or 9,500 units ($380,000 ÷ $40). Thus, the December 31 inventory is 1,900 units (9,500 × 20%). 6. February sales will total 9,800 units ($392,000 ÷ $40), giving rise to a January 31 inventory of 1,960 units (9,800 × 20%). Letting X denote production, then: 12/31/×0 inventory + X – January 20×1 sales = 1/31/×1 inventory 1,900 + X – 9,500 = 1,960 X – 7,600 = 1,960 X = 9,560 7. Financing required is $7,000 ($30,000 minimum balance – $23,000 ending balance):
Cash balance, January 1 $ 45,000 Add: January receipts ($216,000 + $152,000) 368,000 Subtotal $413,000 Less: January payments 390,000 Cash balance before financing $ 23,000
