Question
On July 1, MTC Wholesalers had a cash balance of $175,000 and accounts payable of $99,000. Actual sales for May and June, and budgeted sales
On July 1, MTC Wholesalers had a cash balance of $175,000 and accounts payable of $99,000. Actual sales for May and June, and budgeted sales for July, August, September, and October are:
Month
Actual Sales
Month
Budgeted Sales
May
$150,000
July
$ 90,000
June
160,000
August
80,000
September
100,000
October
120,000
All sales are on credit with 75 percent collected during the month of sale, 20 percent collected during the next month, and 5 percent collected during the second month following the month of sale. Cost of goods sold averages 70 percent of sales revenue. Ending inventory is one-half of the next month's predicted cost of sales. The other half of the merchandise is acquired during the month of sale. All purchases are paid for in the month after purchase. Operating costs are estimated at $28,000 each month and are paid during the month incurred.
Required
Prepare purchases and cash budgets for July, August, and September.
Do notuse a negative sign with your answers.
MTC Wholesalers
Purchases Budget
For the Months of July, August, and September
July
August
September
Inventory required, current sales
$Answer
$Answer
$Answer
Desired ending inventory
Answer
Answer
Answer
Total inventory needs
Answer
Answer
Answer
Less beginning inventory
Answer
Answer
Answer
Purchases
$Answer
$Answer
$Answer
Do notuse a negative sign with your answers.
MTC Wholesalers
Cash Budget
For the Months of July, August, and September
July
August
September
Cash balance, beginning
$Answer
$Answer
$Answer
Cash receipts
Current month's sales
Answer
Answer
Answer
Previous month's sales
Answer
Answer
Answer
Sales two months prior
Answer
Answer
Answer
Total receipts
Answer
Answer
Answer
Cash available
Answer
Answer
Answer
Cash disbursements:
Purchases
Answer
Answer
Answer
Operating costs
Answer
Answer
Answer
Total disbursements
Answer
Answer
Answer
Cash balance, ending
$Answer
$Answer
$Answer
2. Production and Purchases Budgets
At the beginning of October, Comfy Cushions had 1,600 cushions and 10,500 pounds of raw materials on hand. Budgeted sales for the next three months are:
Month
Sales
October
8,000 cushions
November
10,000 cushions
December
13,000 cushions
Comfy Cushions wants to have sufficient raw materials on hand at the end of each month to meet 25 percent of the following month's production requirements and sufficient cushions on hand at the end of each month to meet 20 percent of the following month's budgeted sales. Five pounds of raw materials, at a standard cost of $0.90 per pound, are required to produce each cushion.
Required
a. Make a production budget for October and November.
Do notuse a negative sign with your answers.
Comfy Cushions
Production Budget
For the Months of October and November
October
November
December
Unit Sales
Answer
Answer
Answer
Desired ending inventory
Answer
Answer
Finished goods requirements
Answer
Answer
Less beginning inventory
Answer
Answer
Production requirements
Answer
Answer
b. Make a purchases budget in units and dollars for October.
Do notuse a negative sign with your answers.
Comfy Cushions
Purchases Budget
For the Month of October
October
November
Production requirements
Answer
Answer
Desired ending inventory
Answer
Raw materials requirements
Answer
Less beginning inventory
Answer
Purchase requirements (units)
Answer
Purchase requirements (in dollars)
$Answer
3.
Cash Disbursement
Timber Company is in the process of preparing its budget for next year. Cost of goods sold has been estimated at 70 percent of sales. Lumber purchases and payments are to be made during the month preceding the month of sale. Wages are estimated at 15 percent of sales and are paid during the month of sale. Other operating costs amounting to 10 percent of sales are to be paid in the month following the month of sale. Additionally, a monthly lease payment of $14,000 is paid for computer services. Sales revenue is forecast as follows
Month
Sales Revenue
February
$170,000
March
210,000
April
220,000
May
260,000
June
240,000
July
280,000
Required
Make a schedule of cash disbursements for April, May, and June.
Do notuse a negative sign with your answers.
Timber Company
Schedule of Cash Disbursements
April, May, and June
April
May
June
Lumbers purchases
$Answer
$Answer
$Answer
Wages
Answer
Answer
Answer
Operating expenses
Answer
Answer
Answer
Lease payment
Answer
Answer
Answer
Total disbursements
$Answer
$Answer
$Answer
4. Purchases Budget in Units and Dollars
Budgeted sales of Wirtz Music Shop for the first six months of 2017 are as follows:
Month
Unit Sales
Month
Unit Sales
January
155,000
April
240,000
February
185,000
May
205,000
March
225,000
June
265,000
Beginning inventory for 2017 is 35,000 units. The budgeted inventory at the end of a month is 40 percent of units to be sold the following month. Purchase price per unit is $5.
Make a purchases budget in units and dollars for each month, January through May.
WIRTZ MUSIC SHOP
Purchases Budget
January - May, 2017
January
February
March
April
May
Purchase units:
Answer
Answer
Answer
Answer
Answer
Purchase dollars:
$Answer
$Answer
$Answer
$Answer
$Answer
5. Cash Budget
Patrick's Retail Company is planning a cash budget for the next three months. Estimated sales revenue is as follows:
Month
Sales Revenue
Month
Sales Revenue
January
$ 350,000
March
$ 250,000
February
300,000
April
200,000
All sales are on credit; 60 percent is collected during the month of sale, and 40 percent is collected during the next month. Cost of goods sold is 80 percent of sales. Payments for merchandise sold are made in the month following the month of sale. Operating expenses total $52,000 per month and are paid during the month incurred. The cash balance on February 1 is estimated to be $35,000.
Prepare monthly cash budgets for February, March, and April.
Use negative signs only with beginning and ending cash balances, when appropriate. Do not use negative signs with disbursement answers.
Patrick's Retail Company
Cash Budgets
February, March, and April
February
March
April
Cash balance, beginning
$Answer
$Answer
$Answer
Total Cash receipts
Answer
Answer
Answer
Cash available
Answer
Answer
Answer
Total disbursements
Answer
Answer
Answer
Cash balance, ending
$Answer
$Answer
$Answer
6.
The Williams Supply Company sells for $40 one product that it purchases for $25. Budgeted sales in total dollars for next year are $1,400,000. The sales information needed for preparing the July budget follows:
Month
Sales Revenue
May
$ 34,000
June
48,000
July
56,000
August
64,000
Account balances at July 1 include these:
Cash
$ 24,000
Merchandise inventory
17,500
Accounts receivable (sales)
25,760
Accounts payable (purchases)
16,250
The company pays for one-half of its purchases in the month of purchase and the remainder in the following month. End-of-month inventory must be 50 percent of the budgeted sales in units for the next month. A 2 percent cash discount on sales is allowed if payment is made during the month of sale. Experience indicates that 50 percent of the billings will be collected during the month of sale, 40 percent in the following month, 8 percent in the second following month, and 2 percent will be uncollectible. Total budgeted selling and administrative expenses (excluding bad debts) for the fiscal year are estimated at $210,000 , of which one-half is fixed expense (inclusive of a $21,000 annual depreciation charge). Fixed expenses are incurred evenly during the year. The other selling and administrative expenses vary with sales. Expenses are paid during the month incurred. (Round your answers to the nearest whole number.)
(a) Make a schedule of estimated cash collections for July.
WilliamsSupply Company
Schedule of Cash Collections
For the Month of July
Current month's sales
$Answer
Previous month's sales
$Answer
Two months' prior sales
$Answer
Total cash collections
$Answer
(b) Make a schedule of estimated July cash payments for purchases. For this, perform your calculation using units rounding up to the nearest whole unit. Then convert to dollars for your answer.
WilliamsSupply Company
Schedule of Cash Payments for Purchases
For the Month of July
Current month's purchases
$Answer
Beginning accounts payable
Answer
Total cash payments
$Answer
(c) Create schedules of July selling and administrative expenses, separately identifying those requiring cash disbursements.
WilliamsSupply Company
Schedule of Selling and Administrative Expenses and Cash Disbursements
For the Month of July
Total
Cash
Selling and administrative expenses:
Fixed
$Answer
Cash payment
$Answer
Variable
Answer
Answer
Total expenses and cash disbursements
$Answer
$Answer
(d)Make a cash budget in summary form for July.
Do not use negative signswith any answers below.
WilliamsSupply Company
Cash Budget
For the Month of July
Cash receipts
$Answer
Cash disbursements:
Merchandise
$Answer
Selling and administrative
Answer
Answer
Excess receipts (disbursements)
$Answer
7. Developing a Master Budget for a Merchandising Organization
Dils Brother Department Store prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for 2017.
Dils Brother Department Store
Balance Sheet
March 31, 2017
Assets
Liabilities and Stockholders' Equity
Cash
$4,000
Accounts payable
$31,000
Accounts receivable
31,000
Dividends payable
15,000
Inventory
36,000
Rent payable
3,000
Prepaid Insurance
3,000
Stockholders' equity
50,000
Fixtures
25,000
Total assets
$99,000
Total liabilities and equity
$99,000
Actual and forecasted sales for selected months in 2017 are as follows:
Month
Sales Revenue
January
$ 70,000
February
60,000
March
50,000
April
60,000
May
70,000
June
80,000
July
100,000
August
90,000
Monthly operating expenses are as follows:
Wages and salaries
$ 27,000
Depreciation
100
Utilities
1,500
Rent
3,000
Cash dividends of $15,000 are declared during the third month of each quarter and are paid during the first month of the following quarter. Operating expenses, except insurance, rent, and depreciation are paid as incurred. Rent is paid during the following month. The prepaid insurance is for five more months. Cost of goods sold is equal to 50 percent of sales. Ending inventories are sufficient for 120 percent of the next month's cost of sales. Purchases during any given month are paid in full during the following month. All sales are on account, with 50 percent collected during the month of sale, 40 percent during the next month, and 10 percent during the month thereafter. Money can be borrowed and repaid in multiples of $1,000 at an interest rate of 12 percent per year. The company desires a minimum cash balance of $4,000 on the first of each month. At the time the principal is repaid, interest is paid on the portion of principal that is repaid. All borrowing is at the beginning of the month, and all repayment is at the end of the month. Money is never repaid at the end of the month it is borrowed.
(a) Make a purchases budget for each month of the second quarter ending June 30, 2017.
Dils Brothers Department Store
Monthly Purchase Budget
Quarter Ending June 30, 2017
April
May
June
Total
Budgeted purchases
$Answer
$Answer
$Answer
$Answer
(b) Make a cash receipts schedule for each month of the second quarter ending June 30, 2017. Do not include borrowings.
Dils BrothersDepartment Store
Schedule of Monthly Cash Receipts
Quarter Ending June 30, 2017
April
May
June
Total
Total cash receipts
$Answer
$Answer
$Answer
$Answer
(c) Make a cash disbursements schedule for each month of the second quarter ending June 30, 2017. Do not include repayments of borrowings.
Dils BrothersDepartment Store
Schedule of Monthly Cash Disbursements
Quarter Ending June 30, 2017
April
May
June
Total
Total cash disbursements
$Answer
$Answer
$Answer
$Answer
(d) Make a cash budget for each month of the second quarter ending June 30, 2017. Include budgeted borrowings and repayments.
Only use negative signs, if needed, for:excess receipts over disbursements, balance before borrowings andcash balances (beginning and ending).
Dils BrothersDepartment
Store Monthly Cash Budget
Quarter Ending June 30, 2017
April
May
June
Total
Cash balance, beginning
$Answer
$Answer
$Answer
$Answer
Receipts
Answer
Answer
Answer
Answer
Disbursements
Answer
Answer
Answer
Answer
Excess receipts over disb.
Answer
Answer
Answer
Answer
Balance before borrowings
Answer
Answer
Answer
Answer
Borrowings
Answer
Answer
Answer
Answer
Loan repayments
Answer
Answer
Answer
Answer
Cash balance, ending
$Answer
$Answer
$Answer
$Answer
(e) Make an income statement for each month of the second quarter ending June 30, 2017.
Only usenegative signsto shownet losses for income.
Dils BrothersDepartment Store
Budgeted Monthly Income Statements
Quarter Ending June 30, 2017
April
May
June
Total
Sales
$Answer
$Answer
$Answer
$Answer
Cost of sales
Answer
Answer
Answer
Answer
Gross profit
Answer
Answer
Answer
Answer
Operating expenses:
Wages and salaries
Answer
Answer
Answer
Answer
Depreciation
Answer
Answer
Answer
Answer
Utilities
Answer
Answer
Answer
Answer
Rent
Answer
Answer
Answer
Answer
Insurance
Answer
Answer
Answer
Answer
Interest
Answer
Answer
Answer
Answer
Total expenses
Answer
Answer
Answer
Answer
Net income
$Answer
$Answer
$Answer
$Answer
(f) Make a budgeted balance sheet as of June 30, 2017.
Dils BrothersDepartment Store
Budgeted Balance Sheet
June 30, 2017
Assets
Liabilities and Equity
Cash
$Answer
Merchandise payable
$Answer
Accounts receivable
Answer
Dividend payable
Answer
Inventory
Answer
Rent payable
Answer
Prepaid insurance
Answer
Loans payable
Answer
Fixtures
Answer
Interest payable
Answer
Total assets
$Answer
Stockholders' equity
Answer
Total liab. & equity
$Answer
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