Question-managerial accounting

- Scott 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, Scott 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: eBook a. Budgeted monthly absorption costing Income statements for July through October are as follows: July August September october Sales $40, 090 $ 70, 908 $ 58, 090 $45,090 Print Cost of goods sold 24,090 42,096 30,090 27,980 Gross margin 16,090 28,090 20, 098 18, 090 Selling and administrative expenses: References Selling expense 7,208 11, 708 8,508 7,308 Administrative expense* 5, 608 7, 208 6, 108 5,980 Total expenses 12, 890 18,980 14,698 13, 208 Operating income $ 3, 208 $ 9, 108 $ 5,409 $ 4, 809 * Includes $2,000 depreciation each month. b. Sales are 20% for cash and 80% on credit. c. Credit sales are collected over a three-month perlod, 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 $30,000, and June sales totalled $36,000. d. Inventory purchases are paid for within 15 days. Therefore, 50% of a month's Inventory purchases is paid for In the month of purchase. The remaining 50% is paid In the following month. Accounts payable for Inventory purchases at June 30 total $11,700. e. 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 $18,000. f. Land costing $4,500 will be purchased In July. g. Dividends of $1,000 will be declared and paid In September. h. The cash balance on June 30 Is $8,000; the company must maintain a cash balance of at least this amount at the end of each month. 1. The company has an agreement with a local bank that allows the company to borrow up to a total loan balance of $40,000. The Interest rate on these loans Is 1% per month. All borrowing is done at the beginning of a month. The company would, as far as It Is able, repay the loan at the end of each month. Interest must be paid at the end of each month based on the outstanding loans forRequired: 1. Prepare a schedule of expected cash collections for July, August, and September and for the quarter In total. Collections on sales: July August September Quarter Cash sales 8,000 14,000 10,000 32,000 ebook Credit sales: May 4,800 4,800 June 20,160 5,760 25,920 Print July 3,200 22,400 8,400 32,000 August 5,600 39.200 44,800 September 4,000 4.000 References Total cash collections 36,160 47,760 S 59,600 143,520 2. Prepare the following for merchandise inventory: a. A merchandise purchases budget for July, August, and September. Merchandise Purchases Budget July August September October Budgeted cost of goods sold 24,000 Total needs 24,000 0 Required inventory purchases 24,000 0\f3. Prepare a cash budget for July, August, and September and for the quarter In total. (Round your Intermediate calculations and final answers to the nearest whole dollar. Cash deficiency, repayments and Interest should be Indicated by a minus sign.) Scott Products, Inc. eBook Cash Budget For the Quarter Ended September 30 July August September Quarter Print Cash balance, beginning Add collections from sales References Total cash available 0 0 0 0 Less disbursements: For inventory purchases For selling expenses For administrative expenses For land For dividends Total disbursements 0 0 0 0 Excess (deficiency) of cash available over disbursements 0 0 Financing: Borrowings Repayment Interest Total financing Cash balance, ending 5 0 0