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 Budgeted monthly absorption costing income statements for July to October are as follows July August September October Sales $ 54,000 $ 84,000 $ 64,000 $ 59,000 Cost of goods sold 29,600 47,600 35,600 32,600 Gross margin 24,400 36,400 28,400 26,400 Selling and administrative expenses Selling expense 11,400 14,500 9,900 8,700 Administrative expense 6,350 8,600 7,500 7,300 Total selling and administrative expenses 17,750 23,100 17,400 16,000 Net operating income $ 6,650 $ 13,300 $ 11,000 $ 10,400 Includes $2,700 depreciation each month Sales are 20 for cash and 80 on credit 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 $44,000, and June sales totalled $50,000 Inventory purchases are paid for within 15 days Therefore, 50 of a months 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 $18,700 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 $25,000 Land costing $5,200 will be purchased in July Dividends of $1,700 will be declared and paid in September The cash balance on June 30 is $9,400 the company must maintain a cash balance of at least this amount at the end of each month 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 Required 1 Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total 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 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 August September Quarter Accounts payable, June 30 July purchases August purchases September purchases Total cash disbursements 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 0 wherever required ) 4 Prepare a brief memorandum for the President explaining the usefulness of the Cash Budget Be sure to include a Covering Letter The Covering Letter should include as a minimum of the date of your Report who prepared the Report why you prepared the Report Name of the company 5 Comment on at least 2 strategies that can be implemented to increase cash for the company JANUS PRODUCTS, INC Schedule of Expected Cash Collections July August September Quarter Cash sales Credit sales May June July August September Total cash collections JANUS PRODUCTS, INC Cash Budget For the Quarter Ended September 30 July August September Quarter Total cash available Deduct Disbursements Total disbursements Excess (deficiency) of cash available over disbursements Financing Total financing

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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

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:

Budgeted monthly absorption costing income statements for July to October are as follows:

	July		August		September		October
Sales	$	54,000	$	84,000	$	64,000	$	59,000
Cost of goods sold		29,600		47,600		35,600		32,600
Gross margin		24,400		36,400		28,400		26,400
Selling and administrative expenses:
Selling expense		11,400		14,500		9,900		8,700
Administrative expense*		6,350		8,600		7,500		7,300
Total selling and administrative expenses		17,750		23,100		17,400		16,000
Net operating income	$	6,650	$	13,300	$	11,000	$	10,400

*Includes $2,700 depreciation each month.

Sales are 20% for cash and 80% on credit.
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 $44,000, and June sales totalled $50,000.
Inventory purchases are paid for within 15 days. Therefore, 50% of a months 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 $18,700.
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 $25,000.
Land costing $5,200 will be purchased in July.
Dividends of $1,700 will be declared and paid in September.
The cash balance on June 30 is $9,400; the company must maintain a cash balance of at least this amount at the end of each month.
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.

Required: 1. Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total.

image text in transcribed

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

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 August September Quarter

Accounts payable, June 30

July purchases

August purchases

September purchases

Total cash disbursements

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 "0" wherever required.) image text in transcribed

4. Prepare a brief memorandum for the President explaining the usefulness of the Cash Budget. Be sure to
include a Covering Letter. The Covering Letter should include as a minimum of: the date of your Report; who
prepared the Report; why you prepared the Report; Name of the company.

5. Comment on at least 2 strategies that can be implemented to increase cash for the company.

JANUS PRODUCTS, INC. Schedule of Expected Cash Collections July August September Quarter | Cash sales | Credit sales: May June July August September Total cash collections JANUS PRODUCTS, INC. Cash Budget For the Quarter Ended September 30 July August September Quarter Total cash available Deduct: Disbursements: Total disbursements Excess (deficiency) of cash available over disbursements Financing: Total financing