• Managerial Accounting
• Budgets- Chapter 7, Learning Objective 5
• Question 1:

FAM7-A1 (similar to)Question Help

You are the new manager of the local IT

IT Electronics store. Top management of IT

IT Electronics is convinced that management training should include the active participation of store managers in the budgeting process. You have been asked to prepare a complete master budget for your store forJune, July, and August. All accounting is done centrally so you have no expert help on the premises. Inaddition, tomorrow the branch manager and the assistant controller will be here to examine yourwork; at thattime, they will assist you in formulating the final budget document. The idea is to have you prepare the initial budget on your own so that you gain more confidence about accounting matters. You want to make a favorable impression on yoursuperiors, so you gather the following financial statement and sales data as of May31, 20X8:

Cash

$

19,300

Recent and Projected Sales

Inventory

140,800

April

$

110,000

Accounts receivable

147,200

May

140,000

Net furniture and fixtures

46,000

June

220,000

Total assets

$

353,300

July

140,000

Accounts payable

$

149,800

August

180,000

Owners' equity

203,500

September

100,000

Total liabilities

and owners' equities

$

353,300

Credit sales are 80

80% of total sales. Sixty

Sixty percent of each credit account is collected in the month following the sale and the remaining 40

40% is collected in the subsequent month. Assume that bad debts are negligible and can be ignored. The accounts receivable on May 31 are the result of the credit sales for April andMay:

(0.40

0.40 x 0.80

0.80 x $ 110 comma 000

$110,000) + (1.0 x 0.80

0.80 x $ 140 comma 000

$140,000) = $ 147 comma 200

$147,200.

The policy is to acquire enough inventory each month to equal the followingmonth's projected cost of goods sold. All purchases are paid for in the month following purchase.

The average gross profit on sales is 36

36%. Salaries, wages, and commissions average 21

21% ofsales; all other variable expenses are 6

6% of sales. Fixed expenses forrent, propertytaxes, and miscellaneous payroll and other items are $ 2 comma 000

$2,000 monthly. Assume that these variable and fixed expenses require cash disbursements each month. Depreciation is $ 900

$900 monthly.

InJune, $ 9 comma 000

$9,000 is going to be disbursed for fixtures acquired and recorded in furniture and fixtures in May. The May 31 balance of accounts payable includes this amount.

Assume that a minimum cash balance of $ 11 comma 000

$11,000 is to be maintained. Also assume that all borrowings are effective at the beginning of the month and all repayments are made at the end of the month of repayment. Interest is compounded and added to the outstanding balance eachmonth, but interest is paid only at the ends of months when principal is repaid. The interest rate is 9

9% perannum; round interest computations and interest payments to the nearest dollar. Interest payments may be any dollaramount, but all borrowing and repayments of principal are made in multiples of$1,000.

1.

Prepare a budgeted income statement for the coming Junedash

-August quarter, a cash budget for each of the next 3months, and a budgeted balance sheet for August31, 20X8. All operations are evaluated on abefore-income-tax basis, so income taxes may be ignored here.

2.

Explain why there is a need for a bank loan and what operating sources supply cash for repaying the bank loan.

.

Requirement 1. Prepare a budgeted income statement for the coming June through Augustquarter, a cash budget for each of the next threemonths, and a budgeted balance sheet for August31, 20X8. All operations are evaluated on abefore-income-tax basis, so income taxes may be ignored here.

Before we prepared the budgeted incomestatements, cashbudgets, and budgeted balancesheet, let's prepare a salesbudget, a schedule of cash collections fromcustomers, a purchasesbudget, a schedule of cash disbursements forpurchases, and a schedule of operating expenses and disbursements for expenses(except interest.) Begin by preparing the sales budget for the June through August quarter.

Schedule a: Sales budget

June

July

August

Credit sales

Cash sales

Total sales

Question 2:

A Kyoto

Kyoto clothing wholesaler was preparing its sales budget for the first quarter of 20 Upper X 8

20X8. Forecast sales are as follows(in thousands ofyen):

LOADING...

salesforecast:

January 203,000

February 226,000

March 246,000

Sales are 30 %

30% cash and 70 %

70% on credit. Sixty minus five

Sixtyfive percent of the credit accounts are collected in the month ofsale, 25 %

25% in the month following thesale, and 10 %

10% in the following month. No uncollectible accounts are anticipated. Accounts receivable at the beginning of 20 Upper X 8

20X8 are 112 comma 450

112,450 (10 %

10% of November

November credit sales of $ 130 comma 000

$130,000 and 65 %

65% of December

December credit sales of $ 153 comma 000

$153,000).

Requirement

1.

Prepare a schedule showing sales and cash collections for January

January, February

February, and March

March, 20 Upper X 8

20X8. (Enter all values in thousands ofyen):

Requirement 1. Prepare a schedule showing sales for January

January, February

February, and March

March, 20 Upper X 8

20X8.

Sales budget

January

February

March

Credit sales

Cash sales

Total sales

Question 3:

E7-32 (similar to)Question Help

Blue Ridge Mountain

BlueRidgeMountain Equipment offers a 2 %

2% discount to customers who pay cash at the time of sale and a 1 %

1% discount to customers who pay within the first 10 days of the month after sale. Past experience shows that cash collections from customers tend to occur in the followingpattern:

collectionexperience:

Cash collected at the time of sale

60

%

Collected within the cash discount period in the first 10 days of the month after sale

10

Collected after cash discount period in the first month after sale

15

Collected after cash discount period in the second month after sale

13

Never collected

2

PrintDone

Requirement

1.

Compute the total cash budgeted to be collected in March

March if sales forecasts are $ 369 comma 000

$369,000 for January

January, $ 415 comma 000

$415,000 for February

February, and $ 490 comma 000

$490,000 for March

March.

(Round your answers to the nearest wholedollar.)

March collections

Total March collections

Question 4:

E7-33 (similar to)Question Help

Radiant

Radiant Lighting Supply plans inventory levels(at cost) at the end of each month asfollows: May

May, $ 271 comma 000

$271,000; June

June, $ 229 comma 000

$229,000; July

July, $ 202 comma 000

$202,000; and August

August, $ 243 comma 000

$243,000. Sales are expected to be June

June, $ 450 comma 000

$450,000; July

July, $ 364 comma 000

$364,000; and August

August, $ 304 comma 000

$304,000. Cost of goods sold is 55 %

55% of sales. Purchases in April

April were $ 266 comma 000

$266,000 and in May

May they were $ 192 comma 000

$192,000. Payments for eachmonth's purchases are made asfollows: 15 %

15% during thatmonth, 75 %

75% the nextmonth, and the final 10 %

10% the next month.

Requirement

1. Prepare budget schedules for June

June, July

July, and August

August for purchases and for disbursements for purchases.

Prepare budget schedules for June

June, July

July, and August

August for purchases.

Purchases budget

June

Desired ending inventory

Plus:

Cost of goods sold

Total merchandise needed

Less:

Beginning inventory

Required purchases