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140. Cambridge, Inc., is preparing its master budget for the quarter ended June 30. It sells a
single product for $40 each. Sales are 60% cash and 40% on credit. All credit sales are
collected in the month following the sale. At March 31, the balance in accounts receivable is
$12,000, which represents the uncollected balance on March sales. Budgeted sales for the
next four months follow:
April May June July
Sales in Units ……….. 800 1,000 600 1,200
The product cost is $20 per unit, and desired ending inventory is 60% of the following
month's sales in units. Inventory at March 31 is 480 units. Purchases are paid 50% in the
month of purchase and 50% in the following month. At March 31, the balance in accounts
payable is $11,000, which represents the unpaid purchases from March. Operating expenses
are paid in the month incurred and consist of:
· Commissions (10% of sales)
· Shipping (3% of sales)
· Office salaries ($3,000 per month)
· Rent ($5,000 per month)
Depreciation is $2,000 per month. Income taxes are 40%, and will be paid on July 1. There
are no taxes payable at March 31. A minimum cash balance of $12,000 is required, and the
beginning cash balance is $12,000. Loans are obtained at the end of any month when a cash
shortage occurs. Interest is 1% per month based on the beginning of the month loan balance
and is paid at each month end. If an excess balance of cash exists, loans are repaid at the end
of the month. At March 31, the loan balance is $2,000. Prepare a master budget (round all
dollar amounts to the nearest whole dollar) for each of the months of April, May, and June
that includes the:
· Sales budget
· Table of cash receipts
· Merchandise purchases budget
· Table of cash disbursements for purchases of merchandise
· Table of cash disbursements for selling and administrative expenses
· Cash budget, including information on the loan balance
· Budgeted income statement
141. Miles Company is preparing a cash budget for February. The company has $30,000
cash at the beginning of February and anticipates $75,000 in cash receipts and $96,250 in
cash disbursements during February. Miles Company has an agreement with its bank to
maintain a cash balance of $10,000. What amount, if any, must the company borrow during
February to maintain a $10,000 cash balance?
142. Airtex Company budgeted the following credit sales during the current year: September,
$90,000; October, $123,000; November, $105,000; December, $111,000. Experience has
shown that cash from credit sales is received as follows: 10% in the month of sale, 50% in the
first month after sale, 35% in the second month after sale, and 5% is uncollectible. How much
cash should Airtex Company expect to collect in November from all current and past credit
sales?
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143. The Lamb Company budgeted sales for January, February, and March of $96,000,
$88,000, and $72,000, respectively. Seventy percent of sales are on credit. The company
collects 60% of its credit sales in the month following sale, 35% in the second month
following sale, and 5% is not collected. What are Lamb's expected cash receipts for March
related to all current and past sales?
144. Rich Company's experience shows that 20% of its sales are for cash and 80% are on
credit. An analysis of credit sales shows that 50% are collected in the month following the
sale, 45% are collected in the second month, and 5% prove to be uncollectible. Calculate
August September October November
Sales ……….. $500,000 $525,000 $535,000 $560,000
October November
(1) Receipts from cash sales ……………... (1) (6)
(2) Collections from August credit sales … (2) (7)
(3) Collections from September credit
sales (3) (8)
(4) Collections from October credit sales ... (4) (9)
(5) Total cash collections during the month (5) (10)
145. Use the following data to determine the company's cash disbursements for each month of
August and September:
July August September
Sales……………….. $24,000 $32,000 $36,000
Purchases…………. 14,400 $19,200 $21,600
Payments for purchases……….. One month after purchase
Selling expenses………………… 15% of sales, paid in the month of sale
Administrative expenses……….. 10% of sales, paid in the month of sale
Rent expense……………………. $2,400 per month
Equipment depreciation………… $1,300 per month
146. Slim Corp. requires a minimum $8,000 cash balance. If necessary, loans are taken to
meet this requirement at a cost of 1% interest per month (paid monthly). Loans are repaid at
month's end from any excess cash. The cash balance on July 1 is $8,400. Cash receipts other
than for loans received for July, August, and September are forecasted as $24,000, $32,000,
and $40,000, respectively. Payments other than for loan or interest payments for the same
period are planned at $28,000, $30,000, and $32,000, respectively at July 1, there are no
outstanding loans.
Required:
Prepare a cash budget for July, August, and September.
147. The following information is available for Hammel Company:
a. The Cash Budget for March shows a bank loan of $10,000 and an ending cash balance of
$48,000.
b. The Sales Budget for March indicates sales of $120,000. Accounts receivable is expected to
be 70% of the current-month sales.
c. The Merchandise Purchases Budget indicates that $90,000 in merchandise will be
purchased in March on account and ending inventory for March is predicted to be 600 units @
$35. Purchases on account are paid 100% in the month following the purchase.
d. The Budgeted Income Statement shows a net income of $48,000 and $26,000 in income tax
expense for the quarter ended March 31. Accrued taxes will be paid in April.
e. The Balance Sheet for February shows equipment of $84,000 with accumulated
depreciation of $30,000, common stock of $25,000 and ending retained earnings of $8,000.
There are no changes budgeted in the equipment or common stock accounts.
Prepare a budgeted balance sheet for March.
148. Del Carpio, Inc., sells two products, Widgets and Gadgets. The sales forecast in units for
the first quarter of the coming year is:
Widgets Gadgets
January….. 20,000 36,000
February… 28,000 60,000
March…… 36,000 64,000
Cash sales are 30% of each product's monthly sales. The remaining sales are credit sales
which are collected as follows: 70% in the month of sale, 20% the next month, and 10% in the
following month. Unit sale prices are $30 and $20 for Widgets and Gadgets, respectively.
Determine the company's cash receipts for March from its current and past sales.
