Question 1 Minden Company is a wholesale distributor of premium European chocolates. The company's balance sheet on April 30 is as follows:

MINDEN COMPANY Balance Sheet April 30 Assets Cash $ 16,600 Accounts receivable, customers 63,500 Inventory 35,700 Buildings and equipment, net of depreciation 245,000 Total assets $ 360,800 Liabilities and Shareholders' Equity Accounts payable, suppliers $ 74,400 Note payable 18,300 Capital shares, no par 218,000 Retained earnings 50,100 Total liabilities and shareholders' equity $ 360,800

The company is in the process of preparing budget data for May. A number of budget items have already been prepared, as follows:

Sales are budgeted at $580,000 for May. Of these sales, $174,000 will be for cash; the remainder will be credit sales. One-half of a month's credit sales are collected in the month the sales are made, and the remainder are collected in the following month. All of the April 30 receivables will be collected in May. Purchases of inventory are expected to total $348,000 during May. These purchases will all be on account. 30% of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the April 30 accounts payable to suppliers will be paid during May. The May 31 inventory balance is budgeted at $116,000. Operating expenses for May are budgeted at $208,800, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $5,800 for the month. The note payable on the April 30 balance sheet will be paid during May, with $130 in interest. (All of the interest relates to May.) New refrigerating equipment costing $10,300 will be purchased for cash during May. During May, the company will borrow $58,000 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 May. (Any "Repayments" and "Interest" should be indicated by a minus sign.)

Question 2

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 month's 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.

Question 3

Daisy Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast Asia.

Three cubic centimetres (cc) of solvent Q80 are required to manufacture each unit of Fineclay, one of the company's products. The company is now planning raw materials needs for the third quarter, the quarter in which peak sales of Fineclay occur. To keep production and sales moving smoothly, the company has the following inventory requirements:

The finished goods inventory on hand at the end of each month must be equal to 3,450 units of Fineclay plus 20% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 11,500 units. The raw materials inventory on hand at the end of each month must be equal to one-half of the following month's production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 62,100 cc of solvent Q80. The company maintains no work-in-process inventories.

A sales budget for Fineclay for the last six months of the year follows:

Budgeted Sales in Units July 40,250 August 46,000 September 57,500 October 34,500 November 23,000 December 11,500

Required: 1. Prepare a production budget for Fineclay for the months of July to October.

Question 4

Milo Company manufactures beach umbrellas. The company is now preparing detailed budgets for the third quarter and has assembled the following information to assist in the budget preparation:

The Marketing Department has estimated sales as follows for the remainder of the year (in units): July 48,000 October 38,000 August 88,000 November 28,000 September 68,000 December 28,000

The selling price of the beach umbrellas is $12 per unit. Sales in June were 43,000 units.

All sales are on account. On the basis of past experience, sales are collected in the following pattern: 30 % in the month of sale 65 % in the month following sale 5 % uncollectible The company maintains finished goods inventories equal to 15% of the following month's sales. This requirement will be met at the end of June. Each beach umbrella requires 4 metres of Gilden, a material that is sometimes hard to get. Therefore, the company requires that the inventory of Gilden on hand at the end of each month be equal to 50% of the following month's production needs. The inventory of Gilden on hand at the beginning and end of the quarter will be as follows: June 30 108,000 metres September 30 ? metres Gilden costs $0.80 per metre. One-half of a month's purchases of Gilden are paid for in the month of purchase; the remainder are paid for in the following month. The accounts payable on July 1 for purchases of Gilden during June will be $94,000. Required: 1. Prepare a sales budget, by month and in total, for the third quarter. Also, prepare a schedule of expected cash collections, by month and in total, for the third quarter.