Homework 7 instructions | help [The following information applies to the questions displayed below.] Aztec Company sells
Question:
| Homework 7 | instructions | help |
[The following information applies to the questions displayed below.]
| Aztec Company sells its product for $180 per unit. Its actual and projected sales follow. |
| Units | Dollars | |
| April (actual) | 3,500 | $630,000 |
| May (actual) | 3,800 | 684,000 |
| June (budgeted) | 7,500 | 1,350,000 |
| July (budgeted) | 7,000 | 1,260,000 |
| August (budgeted) | 3,600 | 648,000 |
| All sales are on credit. Recent experience shows that 28% of credit sales is collected in the month of the sale, 42% in the month after the sale, 25% in the second month after the sale, and 5% proves to be uncollectible. The products purchase price is $110 per unit. All purchases are payable within 12 days. Thus, 60% of purchases made in a month is paid in that month and the other 40% is paid in the next month. The company has a policy to maintain an ending monthly inventory of 24% of the next months unit sales plus a safety stock of 135 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,224,000 and are paid evenly throughout the year in cash. The companys minimum cash balance at month-end is $150,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $150,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 12% interest rate. On May 31, the loan balance is $40,500, and the companys cash balance is $150,000. (Round final answers to the nearest whole dollar.) |
rev: 11_19_2013_QC_40413, 10_21_2014_QC_56990
1. value: 2.30 points Required information| Required: | |
| 1. | Prepare a table that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July. |
| 2. | Prepare a table that shows the computation of budgeted ending inventories (in units) for April, May, June, and July. |
| 3. | Prepare the merchandise purchases budget for May, June, and July. Report calculations in units and then show the dollar amount of purchases for each month. |
| 4. | Prepare a table showing the computation of cash payments on product purchases for June and July. |
| 5. | Prepare a cash budget for June and July, including any loan activity and interest expense. Compute the loan balance at the end of each month. (Do not round intermediate calculations.) |
rev: 11_19_2013_QC_40413
References eBook & Resources Expanded tableLearning Objective: 22-C2 Describe a master budget and the process of preparing it. Difficulty: HardLearning Objective: 22-P2 Link both operating and capital expenditures budgets to budgeted financial statements.Check my work2015 McGraw-Hill Education. All rights reserved.
| Homework 7 | instructions | help |
[The following information applies to the questions displayed below.]
| Near the end of 2013, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2013. |
| DIMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2013 | |||||
| Assets | |||||
| Cash | $ | 35,500 | |||
| Accounts receivable | 520,000 | ||||
| Inventory | 157,500 | ||||
| Total current assets | 713,000 | ||||
| Equipment | $ | 538,000 | |||
| Less accumulated depreciation | 67,250 | ||||
| Equipment, net | 470,750 | ||||
| Total assets | $ | 1,183,750 | |||
| Liabilities and Equity | |||||
| Accounts payable | $ | 380,000 | |||
| Bank loan payable | 15,000 | ||||
| Taxes payable (due 3/15/2014) | 91,000 | ||||
| Total liabilities | $ | 486,000 | |||
| Common stock | 474,500 | ||||
| Retained earnings | 223,250 | ||||
| Total stockholders equity | 697,750 | ||||
| Total liabilities and equity | $ | 1,183,750 | |||
| To prepare a master budget for January, February, and March of 2014, management gathers the following information. |
| a. | Dimsdale Sports single product is purchased for $30 per unit and resold for $55 per unit. The expected inventory level of 5,250 units on December 31, 2013, is more than managements desired level for 2014, which is 20% of the next months expected sales (in units). Expected sales are: January, 6,750 units; February, 9,100 units; March, 10,500 units; and April, 9,500 units. |
| b. | Cash sales and credit sales represent 20% and 80%, respectively, of total sales. Of the credit sales, 59% is collected in the first month after the month of sale and 41% in the second month after the month of sale. For the December 31, 2013, accounts receivable balance, $130,000 is collected in January and the remaining $390,000 is collected in February. |
| c. | Merchandise purchases are paid for as follows: 20% in the first month after the month of purchase and 80% in the second month after the month of purchase. For the December 31, 2013, accounts payable balance, $70,000 is paid in January and the remaining $310,000 is paid in February. |
| d. | Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $84,000 per year. |
| e. | General and administrative salaries are $144,000 per year. Maintenance expense equals $1,900 per month and is paid in cash. |
| f. | Equipment reported in the December 31, 2013, balance sheet was purchased in January 2013. It is being depreciated over eight years under the straight-line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter: January, $38,000; February, $98,000; and March, $28,500. This equipment will be depreciated under the straight-line method over eight years with no salvage value. A full months depreciation is taken for the month in which equipment is purchased. |
| g. | The company plans to acquire land at the end of March at a cost of $170,000, which will be paid with cash on the last day of the month. |
| h. | Dimsdale Sports has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and interest is paid at each month-end based on the beginning balance. Partial or full payments on these loans can be made on the last day of the month. The company has agreed to maintain a minimum ending cash balance of $21,450 in each month. |
| i. | The income tax rate for the company is 41%. Income taxes on the first quarters income will not be paid until April 15. |
| Required: |
| Prepare a master budget for each of the first three months of 2014; include the following component budgets: |
rev: 04_30_2014_QC_49073, 07_19_2014_QC_51562, 05_19_2015_QC_CS-16007
6. value: 2.30 points Required information| 1. | Monthly sales budgets. |
| 2. | Monthly merchandise purchases budgets. |
| 3. | Monthly selling expense budgets. |
| 4. | Monthly general and administrative expense budgets. |
rev: 04_30_2014_QC_49073, 05_19_2015_QC_CS-16007
References eBook & Resources Expanded tableLearning Objective: 22-C2 Describe a master budget and the process of preparing it.Learning Objective: 22-P2 Link both operating and capital expenditures budgets to budgeted financial statements. Difficulty: HardLearning Objective: 22-P1 Prepare each component of a master budget and link each to the budgeting process.Check my work 10. value: 2.30 points Required information| 5. | Monthly capital expenditures budgets. |
| 6. | Monthly cash budgets. |
rev: 01_20_2014_QC_43790, 12_09_2014_QC_CS-418, 12_18_2014_QC_CS-418, 04_20_2015_QC_CS-14051
References eBook & Resources Expanded tableLearning Objective: 22-C2 Describe a master budget and the process of preparing it.Learning Objective: 22-P2 Link both operating and capital expenditures budgets to budgeted financial statements. Difficulty: HardLearning Objective: 22-P1 Prepare each component of a master budget and link each to the budgeting process.Check my work 12. value: 2.30 points Required information| 7. | Budgeted income statement for the entire first quarter (not for each month). |
rev: 07_19_2014_QC_51562, 03_19_2015_QC_CS-10782, 05_19_2015_QC_CS-16007
References eBook & Resources Expanded tableLearning Objective: 22-C2 Describe a master budget and the process of preparing it.Learning Objective: 22-P2 Link both operating and capital expenditures budgets to budgeted financial statements. Difficulty: HardLearning Objective: 22-P1 Prepare each component of a master budget and link each to the budgeting process.Check my work 13. value: 2.40 points Required information| 8. | Budgeted balance sheet as of March 31, 2014. |
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