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Problem 8.37

Cash Budget, Pro Forma Balance Sheet

Bernard Creighton is the controller for Creighton Hardware Store. In putting together the cash budget for the fourth quarter of the year, he has assembled the following data.

Problem 8.37 Cash Budget, Pro Forma Balance Sheet Bernard Creighton is the controller for Creighton Hardware Store. In putting together the cash budget for the fourth quarter of the year, he has assembled the following data. Sales Each month, 20 percent of sales are for cash, and 80 percent are on credit. The collection pattern for credit sales is 20 percent in the month of sale, 50 percent in the following month, and 30 percent in the second month following the sale. Each month, the ending inventory exactly equals 40 percent of the cost of next month's sales. The markup on goods is 33.33 percent of cost. Inventory purchases are paid for in the month following purchase. Recurring monthly expenses are as follows: Property taxes of $15,000 are due and payable on September 15. Advertising fees of $6,000 must be paid on October 20. A lease on a new storage facility is scheduled to begin on November 2. Monthly payments are $5,000. The company has a policy to maintain a minimum cash balance of $10,000. If necessary, it will borrow to meet its short-term needs. All borrowing is done at the beginning of the month. All payments on principal and interest are made at the end of the month. The annual interest rate is 9 percent. The company must borrow in multiples of $1,000. A partially completed balance sheet as of August 31 is given below. (Accounts payable is for inventory purchases only.) Required: 0 1 1 Hide 1. Complete the balance sheet given in part (j). Creighton Hardware Store Creighton Hardwa Balance Sheet Balance Sheet August 31 August 31 Ass ets Assets Liab iliti es & Ow ner s' Equ ity Liabilities & Owne Cash $ Cash Correct 7 of Item 1 Accounts receivable Accounts receivab Correct 9 of Item 1 Inventory Inventory Correct 11 of Item 1 Plant and equipment 431,750 Plant and equipm Accounts payable 431,750 $ Accounts payable Correct 15 of Item 1 Common stock 220,000 Common stock 220,000 Retained earnings 268,750 Retained earnings Totals 268,750 $ $ Totals Correct 21 of Item 1 Correct 22 of Item 1 Hide FeedbackShow All Feedback Check My Work Feedback Post Submission Feedback Solution 1 Hide 2. Bernard wants to see how the company is doing prior to starting the month of December. Prepare a cash budget for the months of September, October, and November and for the three-month period in total (the period begins on September 1). Enter repayments, interest, cash deficiencies and negative total financing as negative amounts. If amount is zero, enter "0". Creighton Hardware Store Creighton Hardwa Cash Budget Cash Budget For the Period Ending November 30 For the Period En Sep tem ber Oct obe r September Beginning cash balance $ Nov em ber October $ Tot al Total November $ $ Beginning cash ba Correct 9 of Item 2 Correct 10 of Item 2 Correct 11 of Item 2 Correct 12 of Item 2 Cash collections Cash collections Total cash availab Disbursem ents: Hide FeedbackShow All Feedback Check My Work Feedback Post Submission Feedback Solution 1 Accounts payable Hide Complete a supporting schedule of cash collections. Salaries and wage Creighton Hardware Store Creighton Hardwa Utilities Cash collections Cash collections Other For the Period Ending November 30 For the Period En Property taxes Sep tem ber September Advertising fees Lease Oct obe r October Nov em ber November Tot al Total Total disbursemen Cash sales Minimumcash ba $ $ $ $ Cash sales Correct 9 of Item 3 Correct 10 of Item 3 Correct 11 of Item 3 Correct 12 of Item 3 Credit sales: Total cash needs Credit sales: Current month Current month Excess (deficienc Correct 15 of Item 3 Correct 16 of Item 3 Correct 17 of Item 3 Correct 18 of Item 3 Prior month Prior month Financing: Correct 20 of Item 3 Correct 21 of Item 3 Correct 22 of Item 3 Correct 23 of Item 3 From two months ago Borrowings Fromtwo months Total collections Total collections Repayments Interest Correct 25 of Item 3 Correct 26 of Item 3 Correct 27 of Item 3 Correct 28 of Item 3 $ $ $ Correct 30 of Item 3 Correct 31 of Item 3 Correct 32 of Item 3 Correct 33 of Item 3 Hide FeedbackShow All Feedback Total financing $ Check My Work Ending cash balanFeedback Post Submission Feedback Solution 1 Hide 3. Prepare a pro forma balance sheet as of November 30. Creighton Hardware Store Creighton Hardwa Pro Forma Balance Sheet Pro Forma Balanc November 30 November 30 Assets: Assets: $ Correct 6 of Item 4 Accounts payable Cash Common stock Retained earnings Salaries Correct 5 of Item 4 Accounts payable Accounts receivable Common stock Correct 8 of Item 4 Retained earnings Salaries Correct 7 of Item 4 Accounts payable Common stock Inventory Retained earnings Salaries Correct 9 of Item 4 Correct 10 of Item 4 Accounts payable Common stock Plant and equipment Correct 12 of Item 4 Retained earnings Salaries Correct 11 of Item 4 Liabilities: Liabilities: Accounts payable $ Accounts receivable Cash Inventory Plant and equipment Correct 14 of Item 4 Owners' Equity: Owners' Equity: Correct 15 of Item 4 Accounts receivable Cash Correct 18 of Item 4 Common stock Inventory Plant and equipment Correct 17 of Item 4 Accounts receivable Cash Correct 20 of Item 4 Inventory Plant and equipment Retained earnings Correct 19 of Item 4 $ Totals $ Totals Correct 22 of Item 4 Correct 23 of Item 4 Hide FeedbackShow All Feedback Check My Work Feedback Post Submission Feedback Solution