191) Stanley 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. Stanley 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?
192) Groundworks 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
Groundworks Company expect to collect in November from all current and past credit sales?
193) The Ewing 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, and 40% in the second month following sale. What are
Ewing’s expected cash receipts for March related to all current and past sales?
194) Lafayette 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 the following.
August September October November
Sales ……….. $500,000 $525,000 $535,000 $550,000
October November
Receipts from cash sales ……………… (1) (6)
Collections from August credit sales … (2) (7)
Collections from September credit
sales
(3) (8)
Collections from October credit sales … (4) (9)
Total cash collections during the month (5) (10)
195) Use the following data to determine the company’s cash disbursements for 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
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196) Widmer Corp. requires a minimum $10,000 cash balance. If necessary, loans are taken to meet this
requirement at a cost of 1% interest per month (paid monthly). If the ending cash balance exceeds
the minimum, the excess will be applied to repaying any outstanding loan balance. The cash
balance on July 1 is $10,400. 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.
197) The following information is available for Jergenson 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 $21,000 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 $77,000 with accumulated depreciation of
$28,000, common stock of $25,000 and retained earnings of $8,000. There are no changes budgeted
in the equipment or common stock accounts.
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Prepare a budgeted balance sheet for March.
198) Diego, Inc., sells two products, Baubles and Charms. The sales forecast in units for the first quarter
of the coming year is:
Baubles
Charms
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 Baubles and Charms, respectively.
Determine the company’s cash receipts for March from its current and past sales.
145
199) Todd Enterprises is preparing a cash budget for the second quarter of the coming year. The following
data have been forecasted:
April
May
Sales ……………………………………………….
$150,000
$157,500
Merchandise purchases ……………………………
107,000
112,400
Operating expenses:
Payroll ………………………………………….
13,600
14,280
Advertising …………………………………….
5,400
5,700
Rent …………………………………………….
2,500
2,500
Depreciation ……………………………………
7,500
7,500
End of April balances:
Cash …………………………………………….
30,000
Bank loan payable ………………………………
26,000
Additional data:
(1) Sales are 40% cash and 60% credit. The collection pattern for credit sales is 50% in the month
following the sale and 50% in the month thereafter. Total sales in March were $125,000.
(2) Purchases are all on credit, with 40% paid in the month of purchase and the balance paid in the
following month.
(3) Operating expenses are paid in the month they are incurred.
(4) A minimum cash balance of $25,000 is required at the end of each month.
(5) Loans are used to maintain the minimum cash balance. At the end of each month, interest of 1%
per month is paid on the outstanding loan balance as of the beginning of the month. Repayments are
made whenever excess cash is available.
Prepare the company’s cash budget for May. Show the ending loan balance at May 31.
200) Argenta, Inc. is preparing its master budget for the first quarter of its calendar year. The following
forecasted data relate to the first quarter:
Unit sales:
January …………………………….. 40,000
February …………………………… 55,000
March ……………………………… 50,000
Unit sales price ………………………. $25
Cost of goods sold per unit …………… $13
Expenses:
Commissions ……………………… 10% of sales
Rent ……………………………….. $20,000/month
Advertising ……………………….. 15% of sales
Office salaries …………………….. $75,000/month
Depreciation ………………………. $50,000/month
Interest …………………………….. 15% annually on a $250,000 note payable
Tax rate 40%
Prepare a budgeted income statement for this first quarter.
201) The production budget for Greski Company revealed the following production volume for the
months of July—September. Each unit produced requires 2.5 hours of direct labor. The direct labor
rate is predicted to be $16 per hour in all months. Prepare a direct labor budget for Greski Company
for July—September.
July Aug Sept
Units to be produced 620 680 540
202) Addams, Inc., is preparing its master budget for the second quarter. The following sales and
production data have been forecasted:
April
May
June
July
August
Unit sales ……
400
500
520
480
540
Finished goods inventory on March 31: 120 units
Raw materials inventory on March 31: 450 pounds
Desired ending inventory each month:
Finished goods: 30% of next month’s sales
Raw materials: 25% of next month’s production needs
Number of pounds of raw material required per finished unit: 4 lbs.
How many pounds of raw materials should be purchased in April?
150
203) Snap, Inc., provides the following data for the next four months:
April
May
June
Budgeted production units
442
570
544
Ending Raw Materials Inventory …….
663 lbs.
Ending Finished Goods Inventory ……
174 Units
Desired Ending Inventory:
Raw Materials = 30% of next month’s production needs
Pounds of raw material required for each finished Unit = 5 lbs.
Required:
Calculate the amount of purchases of raw materials in pounds for April and May.
204) Use the following information to prepare the June cash budget for Springer Company. It should
show expected cash receipts and cash disbursement for the month and the cash balance expected on
June 30.
a. Beginning cash balance on June 1 is $52,000.
b. Cash receipts from sales are expected to be $1,625,000.
c. Cash payments for direct materials and direct labor are expected to be $246,500 and 573,100,
respectively.
d. Budgeted cash payments for variable overhead is $340,000.
e. Budgeted depreciation, the only fixed overhead estimated for June: $24,000.
f. Cash selling and administrative expenses budgeted for June are $282,000.
g. Bank loan interest due in June: $8,000.
i. Loan payment of $50,000 should be made if the preliminary cash balance is greater than
$200,000.
151
205) Use the following information to prepare a budgeted income statement for Stellar Company for the
month of June.
a. Beginning cash balance on June 1 is $52,000.
b. Sales amounts are: April (actual), $1,450,000, May (actual), $1,600,000, and June (budgeted),
$1,700,000.
c. Cost of goods sold is 53% of sales.
d. Budgeted cash disbursements for salaries in June: $260,000. Salaries payable on May 31 are
$60,000 and are expected to be $50,000 on June 30.
e. Budgeted depreciation expense for June: $24,000.
f. Other cash expenses budgeted for June: $282,000.
g. Accrued income taxes due in June: $48,000.
h. Bank loan interest due in June: $8,000 which represents the 1% monthly expense on a bank loan
of $800,000.
i. The income tax rate applicable to the company is 30%.
152
206) Use the following information to prepare a budgeted balance sheet for Grover Company for the
month of June.
a. The budgeted net income for the month of June is $236,000.
b. The beginning cash balance is $62,000; total budgeted cash receipts are $1,660,000; total
budgeted cash disbursements are $1,580,000.
c. Budgeted sales for June are $1,700,000. Collections are 40% in the month of sale and 60% in the
month following.
d. The projected inventory balance is 10% of the following month’s sales. Sales for July are projected
to be $1,750,000.
e. Budgeted purchases for June are $900,000 to be paid 80% in the month of purchase and 20% in
the month following.
f. The equipment account balance is $1,400,000 on May 31. No equipment purchases or disposals
were made during June. On May 31, the accumulated depreciation is $276,000. Depreciation
expense for June is estimated to be $24,000.
g. There is an outstanding loan balance of $800,000.
h. Accrued income taxes payable for June 30 are $71,000; and salaries payable are $50,000.
i. The only other balance sheet accounts are: Common Stock, with a balance of $800,000 on May
31, and Retained Earnings with a balance of $300,000 on May 31. No additional common stock
was issued and no dividends were paid during June.
SHORT ANSWER QUESTIONS
207) There are at least five benefits from budgeting. Identify two of these benefits:
(1) ________
(2) ________
208) Guidance for the budget process is usually supplied by a ________ of department heads and other
executives responsible for seeing that budgeted amounts are realistic and coordinated.
209) A ________ is a continuously revised budget that adds future months or quarters to replace months
or quarters that have lapsed.
210) The master budget process nearly always begins with the preparation of the ________ and usually
finishes with the preparation of the ________, the ________, and the ________.
211) ________ is a budget system based on expected activities and their levels that enables management
to plan for resources required to perform the activities.
212) The budget that lists the dollar amounts to be both received from plant asset disposals and spent to
purchase additional plant assets to carry out the budgeted business activities is the ________.
213) The ________ shows expected cash inflows and outflows during the budget period.
214) The ________ , prepared by manufacturing firms, shows the number of units to be produced in a
period based on the unit sales projected in the sales budget, along with inventory considerations.
215) The ________ shows the budgeted costs for factory overhead that will be needed to complete the
estimated production for the period, often separated into variable and fixed costs.