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You have been asked to prepare the monthly cash budget for June and July for the Merchandise and Mercantile Company. The company sells a unique

You have been asked to prepare the monthly cash budget for June and July for the Merchandise and Mercantile Company. The company sells a unique product that is specially made for it by a major product manufacturer. The selling price is $27.00 per unit. All sales are on account.

Merchandise purchases are also on account. The policy of the company is to purchase sufficient quantity of product to ensure that each months ending inventory is 50% of the following months expected sales quantity.

The assignment file contains extracts from the general journal showing the journal entries pertaining to certain relevant transactions that have occurred and a set of entries the bookkeeper has provided that indicate the transactions expected to occur affecting cash, accounts payable, accounts receivable, and merchandise inventory accounts due to the projected sales revenues and projected merchandise purchases on the master budget. This analysis, with other additional data, is shown below. Assume today is May 31, 20X1, and that all dollar amounts are in thousands of dollars.

Information From Accounting Records and Planning Documents
Dr Cr
Extracts From the May 31 Adjusted Trial Balance
May 31 Cash 4,600
Merchandise inventory 10,200
Accounts receivable 29,400
Accounts payable 4,350
Extracts From the General Journal
April 30 Accounts receivable, April sales 43,000
Revenue 43,000
Cash 21,070
Accounts receivable, April sales 21,070
Bad debt expense, percentage of April sales 1,720
Allowance for doubtful accounts 1,720
May 31 Accounts receivable, May sales 97,200
Revenue 97,200
Cash 64,828
Accounts receivable, April sales 17,200
Accounts receivable, May sales 47,628
Merchandise inventory 17,400
Accounts payable, May purchases 17,400
Accounts payable, May purchases 13,050
Cash, payment May purchases 13,050
Projected Entries to the General Journal for Selected
Anticipated Transactions as per Master Budget
June 30 Accounts receivable, June sales 137,700
Revenue 137,700
Cost of sales for June 20,400
Inventory 20,400
Accounts payable, May purchases 4,350
Cash, May purchases 4,350
Cash 3,010
Accounts receivable, April sales 3,010
July 31 Accounts receivable, July sales 98,550
Sales revenue 98,550
August 31 Accounts receivable, August sales 125,550
Sales revenue 125,550
Period fixed expenses, August 2,550
Accumulated depreciation, August 775
Cash 1,775
Variable operating expenses (percent of sales) 12,555
Cash 12,555

Required:
1. Calculate the cost per unit of merchandise inventory.

2.

Prepare a schedule showing the quantity of sales, ending inventory, beginning inventory and the quantity of product purchased in May, June, and July.

3.

Use the price per unit of inventory purchased and the quantity purchased to determine the expenditure for purchases in May, June, and July.

4.

Calculate the percentages of sales the company expects to collect in the month of the sale and in the two months following the sale. What is the percentage of uncollectible sales? Assume that the percentages calculated for the month for which data is provided also apply to sales for any month of the year.

5. Calculate the percentages of May and June merchandise purchases the company expects to pay in June.

6. Calculate the balance in the accounts receivable on June 30. Assume all receivables are due to sales on account.

7.

Calculate the balance in the cash account on June 30, based on the transactions projected to occur in June. Use the collection and disbursement percentages previously calculated. Assume that fixed expenses occur evenly in each month of the year.

8.

Prepare a cash budget for July, in good form. Use the collection and disbursement percentages previously calculated. (Amounts to be deducted should be indicated by a minus sign.)

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