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PROBLEM 8-20 Cash Budget Income Statement: Balance Sheet |L02. LO4. L08, L09. LOLOJ The balance sheet of Phototec, Inc., a distributor of photographic supplies, as of May 31 is given below: Phototec, Inc. Balance Sheet May 31 Assets Cash $ 8.000 Accounts receivable 72,000 Inventory 30,000 Buildings and equipment, net of depreciation 500,000 Total assets. $610,000 Liabilities and Stockholders' Equity Accounts payable $ 90,000 Note payable 15.000 Capital stock. 420,000 Retained earnings 85,000 Total liabilities and stockholders' equity-- S610.000 The company is in the process of preparing a budget for June and has assembled the following data: a Sales are budgeted at $250,000 for June. Of these sales. $60,000 will be for cash; the remain- der will be credit sales. One-half of a month's credit sales are collected in the month the sales are made, and the remainder is collected the following month. All of the May 31 accounts receivable will be collected in June. b. Purchases of inventory are expected to total S200.000 during June. These purchases will all be on account. Forty percent of all inventory purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the May 31 accounts payable to suppliers will be paid during June. 6. The June 30 inventory balance is budgeted at $40.000 d. Selling and administrative expenses for June are budgeted at $51.000, exclusive of deprecia- tion. These expenses will be paid in cash. Depreciation is budgeted at $2,000 for the month. c. The note payable on the May 31 balance sheet will be paid during June. The company's inter est exponse for June (on all borrowing) will be $500, which will be paid in cash 1. New warehouse equipment costing $9.000 will be purchased for cash during June. During June, the company will borrow $18,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year. Required 1. Prepare a cash budget for June. Support your budget with a schedule of expected cash collec- tions from sales and a schedule of expected cash disbursements for inventory purchases. 2. Prepare a budgeted income statement for Junc. Use the absorption costing income statement Class: Problem 08-20 PHOTOTEC, INC Schedule of cash receipts: Cash sales-June Collections on accounts receivable May 31 balance June Total cash receipts Schedule of cash payments for purchases May 31 accounts payable balance June purchases Total cash payments PHOTOTEC, INC. Cash Budget For the Month of June Cash balance, beginning Add receipts from customers Total cash available Less disbursements: Purchase of inventory Selling and administrative expenses Purchases of equipment Total cash disbursements Excess of receipts over disbursements Financing Borrowings-note Repayments-note Interest Total financing Cash balance, ending PHOTOTEC, INC. Budgeted Income Statement For the Month of June Sales Cost of goods sold Beginning inventory Purchases Goods available for sale Ending inventory Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income 3. PHOTOTEC, INC. Budgeted Balance Sheet June 30 Assets Cash Accounts receivable Inventory Plant and equipment, net of depreciation Total assets Liabilities and Equity Accounts payable Note payable Capital stock Retained earnings Total liabilities and equity Given Data P08-20: PHOTOTEC, INC. Balance Sheet May 31 Assets Cash $ 8,000 Accounts receiv 72,000 Inventory 30,000 Buildings and e 500,000 Total assets $ 610,000 bilities and Stockholders' Equ Accounts payat $ 90,000 Note payable 15,000 Capital stock 420,000 Retained earnin 85,000 Total liabilities a $ 610,000 Budgeted Data relating to Jur Budgeted sales $ 250,000 Budgeted sales $ 60,000 Percent of credi 50% May accounts 100% Expected invent $ 200,000 Purchases paid 40% May accounts p 100% Budgeted inven $ 40,000 Budgeted sellin $ 51,000 Budgeted depre $ 2,000 Existing note pa 100% Interest expens $ 500 Equipment purc $ 9,000 New note $ 18,000 PROBLEM 8-24 Cash Budget with Supporting Schedules LOZ, LOC. LOZLOS The president of Univax, Inc., has just approached the company'shank seeking short-term financ ing for the coming year. Year 2. Univax is a distributor of commercial vacuum cleaners. The bank has stated that the loan request must be accompanied by a detailed cash budget that shows the quarters in which financing will be needed, as well as the amounts that will be needed and the quarters in which repayments can be made To provide this information for the bank, the president has directed that the following data be gathered from which a cash budget can be prepared: Budgeted sales and merchandise purchases for Year 2. as well as actual sales and purchases for the last quarter of Year I, are as follows: Merchandise Purchases $180.000 Sales 3 Year 1 Fourth quarter actual $300,000 5 Year 2 5 First quarter estimated $400.000 7 Second quarter estimated $500,000 3 Third quarter estimated $600,000 Fourth quarter estimated $480,000 20 HSheet Sheet2 Sheet $260.000 $310.000 $370.000 $240.000 c. b. The company typically collects 335 of a quarter's sales before the quarter ends and another 65% in the following quarter. The remainder is uncollectible. This pattern of collections is now being experienced in the actual data for the Year I fourth quarter. Some 20% of a quarter's merchandise purchases are paid for within the quarter. The remain- der is paid in the following quarter. d. Selling and administrative expenses for Your 2 are budgeted at 590,000 per quarter plus 12% of sales of the fixed amount, $20,000 each quarter is depreciation. The company will pay $10,000 in cash dividends each quarter, Land purchases will be made as follows during the year: $80.000 in the second quarter and $48.500 in the third quarter. The Cash account contained $20,000 at the end of Ycur 1. The company must maintain a mini- mum cash balance of at least 18.000 h. The company has an agreement with a local bank that allows the company to borrow in incre ments of S10,000 at the beginning of each quarter op to a total loan balance of $100,000. 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 year, i. At present, the company has no loans outstanding. Required: 1. Prepare the following, by quarter and in total, for Year 2: a. A schedule of expected cash collections on sales # A schedule of expected cash disbursements for merchandise purchases. 2. Compute the expected cash disbursements for selling and administrative expenses, by quarter and in total, for Year 2 3. Prepare a cash budget by quarter and in total for Year 2. Total Student Name: Class: Problem 08-24 UNIVAX, INC ta. Schedule of expected cash collections Year 2 Quarter First Second Third Fourth Year 1 - Fourth quarter sales: - Year 2 - First quarter sales: Year 2 - Second quarter sales: Year 2 - Third quarter sales: Year 2 - Fourth quarter sales: Total cash collections 16. Schedule of expected cash disbursements for merchandise purchases for Year 2 Year 2 Quarter First Second Third Fourth Year 1 - Fourth quarter purchases: Year 2 - First quarter purchases: Year 2 - Second quarter purchases: Year 2 - Third quarter purchases: Year 2 - Fourth quarter purchases: Total cash disbursements Total Fourth Year 2. Budgeted selling and administrative expenses for Year 2 Year 2 Quarter First Second Third Budgeted sales Variable expense rate Variable expenses Fixed expenses Total expenses Less depreciation Cash disbursements 3. Cash budget for Year 2 Year 2 Quarter Second Third First Fourth Yoar Cash balance, beginning Add collections from salos Total cash available Less disbursements: Merchandise purchases Operating expenses Dividends Land Total disbursements Excess (deficiency) of receipts over disbursements Financing Borrowings Repayments Interest Total financing Cash balance, ending Given Data P08-24: UNIVAX, INC. Budgeted Sales and Merchandise Purchases: Merchandise Sales Purchases Year 1: Fourth quarter $ 300,000 $ 180,000 Year 2: First quarter e: $ 400,000 $ 260,000 Second quarte $ 500,000 $ 310,000 Third quarter $ 600,000 $ 370,000 Fourth quarter $ 480,000 $ 240,000 Additional information: Percentage of sales collected in same quarter Percentage of sales collected in quarter followin Percentage of sales deemed uncollectible Percentage of merchandise purchases paid in s Percentage of merchandise purchases pain info Budgeted quarterly operating expenses for Yea $ plus percentage of sales Amount of depreciation budgeted each quarter $ Dividends to be paid each quarter $ Cash purchase of land in second quarter $ Cash purchase of land in third quarter $ Cash account balance at end of Year 1 $ Minimum cash balance required $ Bank loan borrowing increments $ Maximum loan balance allowed $ Interest rate per quarter on bank loans Current outstanding loan balance $ 33% 65% 2% 20% 80% 90,000 12% 20,000 10,000 80,000 48,500 20,000 18,000 10,000 100,000 3.0% u $