1. Janus Products, Inc. is a merchandising company that sells binders, paper, and other school supplies. The company is planning its cash needs for the third quarter. In the past, Janus Products has had to borrow money during the third quarter to support peak sales of back-to-school materials, which occur during August. The following information has been assembled to assist in preparing a cash budget for the quarter: a. Budgeted monthly absorption costing income statements for July to October are as follows: Sales Cost of goods sold Gross margin Selling and administrative expenses: Administrative expense* July August September October $48,000 $78,000 $ 58,000 $53,000 27,200 45,200 33,200 30,200 20,800 32,800 24,800 22,800 Selling expense 9,600 13,300 6,050 8,000 Total selling and administrative expenses 15,650 21,300 9,300 8,100 6,900 6,700 16,200 14,800 Net operating income $ 5,150 $11,500 $ 8,600 $ 8,000 *Includes $2,400 depreciation each month. Required: 1. Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total. Cash sales Credit sales May June July August September Total cash collections JANUS PRODUCTS, INC. Schedule of Expected Cash Collections July August September Quarter 0 $ 0 $ 0 $ 2. Prepare the following for merchandise inventory: a. A merchandise purchases budget for July, August, and September. JANUS PRODUCTS, INC. Merchandise Purchases Budget July August September b. Sales are 20% for cash and 80% on credit. c. Credit sales are collected over a three-month period, with 10% collected in the month of sale, 70% in the month following sale, and 20% in the second month following sale. May sales totalled $38,000, and June sales totalled $44,000. 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% are paid in the following month. Accounts payable for inventory purchases at June 30 total $15,700. e. The company maintains its ending inventory levels at 75% of the cost of the merchandise to be sold in the following month. The merchandise inventory at June 30 is $22,000. f. Land costing $4,900 will be purchased in July. g. Dividends of $1,400 will be declared and paid in September. h. The cash balance on June 30 is $8,800; the company must maintain a cash balance of at least this amount at the end of each month. i. The company has an agreement with a local bank that allows it to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $40,000. 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. Total needs b. A schedule of expected cash disbursements for merchandise purchases for July, August, and September and for the quarter in total. JANUS PRODUCTS, INC. Schedule of Expected Cash Disbursements July Accounts payable, June 30 July purchases August purchases September purchases August September Quarter Total cash disbursements $ 0 $ 0 $ 0 $ 3. Prepare a cash budget for July, August, and September and for the quarter in total. (Roundup "Borrowing" and "Repayments" answers to the nearest whole dollar amount. Any "Repayments" and "Interest" should be indicated by a minus sign. Leave no cells blank-be certain to enter "O" wherever required.) JANUS PRODUCTS, INC. A sales budget for Fineclax for the last six months of the year follows: Totalcash available Deduct Disbursements Cash Budget For the Quarter Ended September 30 July August September Quarter Total disbursements Excess (deficiency) of cash available over disbursements Financing Total financing July August September October November December Budgeted Sales in Units 29,750 34,000 42,500 25,500 17,000 8,500 Required: 1. Prepare a production budget for Fineclay for the months of July to October. DAISY PRODUCTS LIMITED Production Budget July August September October 2. Daisy Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast Asia. Three cubic centimetres (cc) of solvent Q80 are required to manufacture each unit of Fineclax, one of the company's products. The company is now planning raw materials needs for the third quarter, the quarter in which peak sales of Fineclay occur. To keep production and sales moving smoothly, the company has the following inventory requirements: a. The finished goods inventory on hand at the end of each month must be equal to 2,550 units of Fineclax plus 20% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 8,500 units. b. The raw materials inventory on hand at the end of each month must be equal to one-half of the following month's production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 45,900 cc of solvent Q80. c. The company maintains no work-in-process inventories. Total needs 3. Prepare a budget showing the quantity of solvent Q80 to be purchased for July, August, and September, and for the quarter in total Total solvent Q80 needs DAISY PRODUCTS LIMITED Raw Materials Purchases Budget July August September Third Quarter 3. Minden Company is a wholesale distributor of premium European chocolates. The company's balance sheet on April 30 is as follows: MINDEN COMPANY Balance Sheet April 30 Assets Cash Accounts receivable, customers Inventory $ 12,600 58,500 32,700 Buildings and equipment, net of depreciation 225,000 Total assets Liabilities and Shareholders' Equity Accounts payable, suppliers $328,800 $ 68,400 Note payable 16,300 Capital shares, no par 198,000 Retained earnings 46,100 Total liabilities and shareholders' equity $328,800 MINDEN COMPANY Cash Budget For the Month Ended May 31 Total cash available Deduct: Disbursements: Total cash disbursements Excess of receipts over disbursements Financing Total financing 2. Prepare a budgeted income statement for May. MINDEN COMPANY Budgeted Income Statement For the Month Ended May 31 Cost of goods sold: The company is in the process of preparing budget data for May. A number of budget items have already been prepared, as follows: a. Sales are budgeted at $380,000 for May. Of these sales, $114,000 will be for cash; the remainder will be credit sales. One-half of a month's credit sales are collected in the month the sales are made, and the remainder are collected in the following month. All of the April 30 receivables will be collected in May. b. Purchases of inventory are expected to total $228,000 during May. These purchases will all be on account. 30% of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the April 30 accounts payable to suppliers will be paid during May. c. The May 31 inventory balance is budgeted at $76,000. d. Operating expenses for May are budgeted at $136,800, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $3,800 for the month. e. The note payable on the April 30 balance sheet will be paid during May, with $130 in interest. (All of the interest relates to May.) f. New refrigerating equipment costing $8,300 will be purchased for cash during May. g. During May, the company will borrow $38,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year. Required: 1. Prepare a cash budget for May. Goods available for sale Cost of goods sold 3. Prepare a budgeted balance sheet as of May 31. MINDEN COMPANY Budgeted Balance Sheet as of May 31 Assets Total assets Liabilities and Shareholders' Equity