Grove, Inc. is a wholesaler for its only product, deluxe wireless electric drills, which sell for $
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Question:
Grove, Inc. is a wholesaler for its only product, deluxe wireless electric drills, which sell for $ each and cost Grove $ each. On December Grove's management requested a cash budget for December. The following selected account balances at November were gathered by the accounting department:
Cash $
Marketable securities at cost
Accounts receivable all trade
Inventories units
Operating expenses payable
Accounts payable all merchandise
Note payable due
Actual sales for the months of October and November were and units, respectively. Projected unit sales for December and January are and respectively. Experience indicates that of sales should be collected in the month of sale, in the month following sale, and the balance in the second month following sale. Uncollectible accounts, returns, and allowances are negligible.
Planned purchases should provide ending inventories equal to of next month's unit sales volume. Approximately of the purchases are paid for in the month of purchase and the balance in the following month.
Monthly operating expenses are budgeted at $ per unit sold plus a fixed amount of $ including depreciation of $ Except for depreciation, of operating expenses are paid in the month incurred and the balance in the following month. Interest expense is included in operating expenses.
Special anticipated yearend transactions include the following:
Declaration of a $ cash dividend to be paid weeks after the December date of record.
Sale of onehalf of the marketable securities held on November a gain of $ is anticipated.
Pay off the note payable due December
Tradein of an old computer originally costing $ and now having accumulated depreciation of $ at a gain of $ on a new computer costing $ Sufficient cash will be paid at the time of tradein so that only of the total price will have to be financed.
Grove's treasurer has a policy of maintaining a minimum monthend cash balance of $ but wants to raise this to $ at December She has a standing arrangement with the bank to borrow any amount up to a limit of $
Prepare a cash budget for Grove, Inc., for December.
Collections in December from customers:
From October sales Answer
From November sales Answer
From December sales Answer
Total collections Answer
Payments on account for merchandise purchases:
November December
Unit Sales Answer Answer
Ending inventories Answer Answer
Total units to be available Answer Answer
Beginning inventories Answer Answer
Units to be purchased Answer Answer
Total dollar purchases Answer Answer
Portion paid in December Answer Answer
Payment of operating expenses:
November December
Total variable operating expenses Answer Answer
Fixed operating expenses Answer Answer
Total operating expenses Answer Answer
Monthly depreciation Answer Answer
Operating expenses requiring payment Answer Answer
Amounts to be paid in December Answer Answer
Cash required at time of computer purchase:
Cost of new computer Answer
Book value of old computer Answer
Gain on tradein Answer
Total tradein allowance Answer
Balance owing at tradein Answer
Portion to be financed Answer
Cash payment required Answer
Grove, Inc.
Cash Budget
For the Month Ended December
Beginning cash balance Answer
Cash receipts:
Collections from customers calculated above Answer
Payment on dividends declared or Payoff of note payable or Sale on securities Answer
Shortterm borrowing Answer
Cash available Answer
Cash disbursements:
Payments on accounts payable calculated above Answer
Payments of operating expenses payable calculated above Answer
Down payment on computer calculated above Answer
Payment on dividends declared or Payoff of note payable or Sale on securities Answer
Total cash disbursements Answer
Ending cash balance
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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