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152.
Lien Company is a merchandising company that sells a single product. The company’s
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inventories, production, and sales in units for the next three months have been forecasted
as follows:
October
November
December
Beginning
inventory
10,000
10,000
10,000
Merchandise
purchases
60,000
70,000
35,000
Sales
60,000
70,000
40,000
Ending inventory
10,000
10,000
5,000
Units are sold for $12 each. One fourth of all sales are paid for in the month of sale and
the balance are paid for in the following month. Accounts receivable at September 30
totaled $450,000.
Merchandise is purchased for $7 per unit. Half of the purchases are paid for in the month
of the purchase and the remainder are paid for in the month following purchase.
Marketing and administrative expenses are expected to total $120,000 each month. One
half of these expenses will be paid in the month in which they are incurred and the
balance will be paid in the following month. Accounts payable at September 30 totaled
$290,000.
Cash at September 30 totaled $80,000. A payment of $300,000 for purchase of equipment
is scheduled for November, and a dividend of $200,000 is to be paid in December. Ignore
depreciation for purposes of preparing the schedules.
Required:
a. Prepare a schedule of expected cash collections for each of the months of October,
November, and December.
b. Prepare a schedule showing expected cash disbursements for merchandise purchases
and marketing and administrative expenses for each of the months October, November,
and December.
c. Prepare a cash budget for each of the months October, November, and December.
There is no minimum required ending cash balance.
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153.
Marino Company has projected sales and production in units for the second quarter of the
year as follows:
April
May
June
Sales
30,000
20,000
25,000
Production
25,000
25,000
30,000
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154.
Albert Corporation is a wholesaler of industrial goods. Data regarding the store’s
operations follow:
• Sales are budgeted at $350,000 for November, $360,000 for December, and $340,000 for
January.
• Collections are expected to be 60% in the month of sale, 39% in the month following the
sale, and 1% uncollectible.
• The cost of goods sold is 75% of sales.
• The company purchases 40% of its merchandise in the month prior to the month of sale
and 60% in the month of sale. Payment for merchandise is made in the month following
the purchase.
• The November beginning balance in the accounts receivable account is $70,000.
• The November beginning balance in the accounts payable account is $257,000.
Required:
a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.
155.
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156.
High Plains Lumber sells lumber and general building supplies to building contractors in a
medium-sized town in North Dakota. Data regarding the store’s operations follow:
• Sales are budgeted at $340,000 for November, $350,000 for December, and $370,000 for
January.
• Collections are expected to be 55% in the month of sale, 44% in the month following the
sale, and 1% uncollectible.
• The cost of goods sold is 75% of sales.
• The company purchases 60% of its merchandise in the month prior to the month of sale
and 40% in the month of sale. Payment for merchandise is made in the month following
the purchase.
• Other monthly expenses to be paid in cash are $21,100.
• Monthly depreciation is $19,000.
• Ignore taxes.
Statement of Financial Position
October 31
Assets
Cash
$13,000
Accounts receivable (net of
allowance for uncollectible accounts)
82,000
Inventory
153,000
Property, plant, and equipment (net
of $598,000 accumulated
depreciation)
1,138,000
Total assets
$1,386,000
Liabilities and Stockholders’ Equity
Accounts payable
$257,000
Common stock
600,000
Retained earnings
529,000
Total liabilities and stockholders’
equity
$1,386,000
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157.
Washington Gas Corporation supplies acetylene and other compressed gases to industry.
Data regarding the store’s operations follow:
• Sales are budgeted at $320,000 for November, $340,000 for December, and $330,000 for
January.
• Collections are expected to be 75% in the month of sale, 20% in the month following the
sale, and 5% uncollectible.
• The cost of goods sold is 65% of sales.
• The company purchases 80% of its merchandise in the month prior to the month of sale
and 20% in the month of sale. Payment for merchandise is made in the month following
the purchase.
• Other monthly expenses to be paid in cash are $21,000.
• Monthly depreciation is $16,000.
• Ignore taxes.
Statement of Financial Position
October 31
Assets
Cash
$22,000
Accounts receivable (net of
allowance for uncollectible accounts)
82,000
Inventory
166,400
Property, plant, and equipment (net
of $658,000 accumulated
depreciation)
1,170,000
Total assets
$1,440,400
Liabilities and Stockholders’ Equity
Accounts payable
$199,000
Common stock
840,000
Retained earnings
401,400
Total liabilities and stockholders’
equity
$1,440,400
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Required:
a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.
c. Prepare Cash Budgets for November and December.
d. Prepare Budgeted Income Statements for November and December.
e. Prepare a Budgeted Balance Sheet for the end of December.
