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145.
Muecke Inc. is working on its cash budget for April. The budgeted beginning cash balance is
$40,000. Budgeted cash receipts total $150,000 and budgeted cash disbursements total
$158,000. The desired ending cash balance is $50,000.
To attain its desired ending cash balance for April, the company needs to borrow:
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146.
The Adams Corporation, a merchandising firm, has budgeted its activity for November
according to the following information:
• Sales at $450,000, all for cash.
• Merchandise inventory on October 31 was $200,000.
• The cash balance November 1 was $18,000.
• Selling and administrative expenses are budgeted at $60,000 for November and are paid for
in cash.
• Budgeted depreciation for November is $25,000.
• The planned merchandise inventory on November 30 is $230,000.
• The cost of goods sold is 70% of the selling price.
• All purchases are paid for in cash.
• There is no interest expense or income tax expense.
The budgeted cash receipts for November are:
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147.
The Adams Corporation, a merchandising firm, has budgeted its activity for November
according to the following information:
• Sales at $450,000, all for cash.
• Merchandise inventory on October 31 was $200,000.
• The cash balance November 1 was $18,000.
• Selling and administrative expenses are budgeted at $60,000 for November and are paid for
in cash.
• Budgeted depreciation for November is $25,000.
• The planned merchandise inventory on November 30 is $230,000.
• The cost of goods sold is 70% of the selling price.
• All purchases are paid for in cash.
• There is no interest expense or income tax expense.
The budgeted cash disbursements for November are:
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148.
The Adams Corporation, a merchandising firm, has budgeted its activity for November
according to the following information:
• Sales at $450,000, all for cash.
• Merchandise inventory on October 31 was $200,000.
• The cash balance November 1 was $18,000.
• Selling and administrative expenses are budgeted at $60,000 for November and are paid for
in cash.
• Budgeted depreciation for November is $25,000.
• The planned merchandise inventory on November 30 is $230,000.
• The cost of goods sold is 70% of the selling price.
• All purchases are paid for in cash.
• There is no interest expense or income tax expense.
The budgeted net income for November is:
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149.
Carter Lumber sells lumber and general building supplies to building contractors in a medium-
sized town in Montana. Data regarding the store’s operations follow:
o Sales are budgeted at $380,000 for November, $390,000 for December, and $400,000 for
January.
o Collections are expected to be 70% in the month of sale, 27% in the month following the
sale, and 3% uncollectible.
o The cost of goods sold is 65% of sales.
o The company desires to have an ending merchandise inventory equal to 80% of the
following month’s cost of goods sold. Payment for merchandise is made in the month following
the purchase.
o Other monthly expenses to be paid in cash are $22,000.
o Monthly depreciation is $20,000.
o Ignore taxes.
Balance Sheet
October 31
Assets
Cash
$13,000
Accounts receivable, net of allowance for uncollectible accounts
77,000
Inventory
197,600
Property, plant and equipment, net of $502,000 accumulated depreciation
992,000
Total assets
$1,279,600
Liabilities and Stockholders’ Equity
Accounts payable
$240,000
Common stock
780,000
Retained earnings
259,600
Total liabilities and stockholders’ equity
$1,279,600
Sales
Cost of goods sold (65% of sales)
Gross margin
Other monthly expenses
Depreciation
Bad debt expense (3% of sales)
11,700
Net income
$82,800
The net income for December would be:
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7-207
150.
Carter Lumber sells lumber and general building supplies to building contractors in a medium-
sized town in Montana. Data regarding the store’s operations follow:
o Sales are budgeted at $380,000 for November, $390,000 for December, and $400,000 for
January.
o Collections are expected to be 70% in the month of sale, 27% in the month following the
sale, and 3% uncollectible.
o The cost of goods sold is 65% of sales.
o The company desires to have an ending merchandise inventory equal to 80% of the
following month’s cost of goods sold. Payment for merchandise is made in the month following
the purchase.
o Other monthly expenses to be paid in cash are $22,000.
o Monthly depreciation is $20,000.
o Ignore taxes.
Balance Sheet
October 31
Assets
Cash
$13,000
Accounts receivable, net of allowance for uncollectible accounts
77,000
Inventory
197,600
Property, plant and equipment, net of $502,000 accumulated depreciation
992,000
Total assets
$1,279,600
Liabilities and Stockholders’ Equity
Accounts payable
$240,000
Common stock
780,000
Retained earnings
259,600
Total liabilities and stockholders’ equity
$1,279,600
Cash balance, November 1
Add: accounts receivable collection
77,000
Add: November credit sales collections ($380,000 × 70%)
Cash available
Less: accounts payable disbursement
Less: November expenses disbursement
Cash balance, December 1
Add: November credit sales collections ($380,000 × 27%)
The cash balance at the end of December would be:
7-208
7-209
151.
Carter Lumber sells lumber and general building supplies to building contractors in a medium-
sized town in Montana. Data regarding the store’s operations follow:
o Sales are budgeted at $380,000 for November, $390,000 for December, and $400,000 for
January.
o Collections are expected to be 70% in the month of sale, 27% in the month following the
sale, and 3% uncollectible.
o The cost of goods sold is 65% of sales.
o The company desires to have an ending merchandise inventory equal to 80% of the
following month’s cost of goods sold. Payment for merchandise is made in the month following
the purchase.
o Other monthly expenses to be paid in cash are $22,000.
o Monthly depreciation is $20,000.
o Ignore taxes.
Balance Sheet
October 31
Assets
Cash
$13,000
Accounts receivable, net of allowance for uncollectible accounts
77,000
Inventory
197,600
Property, plant and equipment, net of $502,000 accumulated depreciation
992,000
Total assets
$1,279,600
Liabilities and Stockholders’ Equity
Accounts payable
$240,000
Common stock
780,000
Retained earnings
259,600
Total liabilities and stockholders’ equity
$1,279,600
The accounts receivable balance, net of uncollectible accounts, at the end of December
would be:
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152.
Carter Lumber sells lumber and general building supplies to building contractors in a medium-
sized town in Montana. Data regarding the store’s operations follow:
o Sales are budgeted at $380,000 for November, $390,000 for December, and $400,000 for
January.
o Collections are expected to be 70% in the month of sale, 27% in the month following the
sale, and 3% uncollectible.
o The cost of goods sold is 65% of sales.
o The company desires to have an ending merchandise inventory equal to 80% of the
following month’s cost of goods sold. Payment for merchandise is made in the month following
the purchase.
o Other monthly expenses to be paid in cash are $22,000.
o Monthly depreciation is $20,000.
o Ignore taxes.
Balance Sheet
October 31
Assets
Cash
$13,000
Accounts receivable, net of allowance for uncollectible accounts
77,000
Inventory
197,600
Property, plant and equipment, net of $502,000 accumulated depreciation
992,000
Total assets
$1,279,600
Liabilities and Stockholders’ Equity
Accounts payable
$240,000
Common stock
780,000
Retained earnings
259,600
Total liabilities and stockholders’ equity
$1,279,600
Budgeted cost of goods sold (65% of sales)
Total needs
Required purchases
$258,700
Accounts payable at the end of December would be:
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7-212
153.
Carter Lumber sells lumber and general building supplies to building contractors in a medium-
sized town in Montana. Data regarding the store’s operations follow:
o Sales are budgeted at $380,000 for November, $390,000 for December, and $400,000 for
January.
o Collections are expected to be 70% in the month of sale, 27% in the month following the
sale, and 3% uncollectible.
o The cost of goods sold is 65% of sales.
o The company desires to have an ending merchandise inventory equal to 80% of the
following month’s cost of goods sold. Payment for merchandise is made in the month following
the purchase.
o Other monthly expenses to be paid in cash are $22,000.
o Monthly depreciation is $20,000.
o Ignore taxes.
Balance Sheet
October 31
Assets
Cash
$13,000
Accounts receivable, net of allowance for uncollectible accounts
77,000
Inventory
197,600
Property, plant and equipment, net of $502,000 accumulated depreciation
992,000
Total assets
$1,279,600
Liabilities and Stockholders’ Equity
Accounts payable
$240,000
Common stock
780,000
Retained earnings
259,600
Total liabilities and stockholders’ equity
$1,279,600
Sales
Cost of goods sold
Gross margin
Bad debt expense
Other monthly expenses
Depreciation
Net income
Retained earnings at the end of December would be:
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Essay Questions
7-214
154.
Caprice Corporation is a wholesaler of industrial goods. Data regarding the store’s operations
follow:
o Sales are budgeted at $350,000 for November, $320,000 for December, and $300,000 for
January.
o Collections are expected to be 80% in the month of sale, 16% in the month following the
sale, and 4% uncollectible.
o The cost of goods sold is 70% of sales.
o The company desires an ending merchandise inventory equal to 60% of the cost of goods
sold in the following month. Payment for merchandise is made in the month following the
purchase.
o The November beginning balance in the accounts receivable account is $78,000.
o The November beginning balance in the accounts payable account is $254,000.
Required:
a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.
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155.
Clay Corporation has projected sales and production in units for the second quarter of the
coming year as follows:
April
May
June
Sales
50,000
40,000
60,000
Production
60,000
50,000
50,000
Cash-related production costs are budgeted at $5 per unit produced. Of these production
costs, 40% are paid in the month in which they are incurred and the balance in the following
month. Selling and administrative expenses will amount to $100,000 per month. The accounts
payable balance on March 31 totals $190,000, which will be paid in April.
All units are sold on account for $14 each. Cash collections from sales are budgeted at 60%
in the month of sale, 30% in the month following the month of sale, and the remaining 10% in
the second month following the month of sale. Accounts receivable on April 1 totaled $500,000
($90,000 from February’s sales and $410,000 from March’s sales).
Required:
a. Prepare a schedule for each month showing budgeted cash disbursements for Clay
Corporation.
b. Prepare a schedule for each month showing budgeted cash receipts for Clay Corporation.
a.
$300,000
$250,000
$250,000
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7-217
156.
Mate Boomerang Corporation manufactures and sells plastic boomerangs. Expected
boomerang sales (in units) for the upcoming months are as follows:
July
Aug.
Sept.
Oct.
Nov.
Dec.
Budgeted
unit sales
12,000
15,000
10,000
8,000
7,000
11,000
Mate likes to maintain a finished goods inventory equal to 10% of the next month’s estimated
sales. Seven ounces of plastic resin are needed to produce every boomerang. Mate likes to
have enough plastic resin on hand at the end of the month to cover 25% of the next month’s
production requirements.
Required:
How many ounces of plastic resin should Mate plan on purchasing during the month of
October?
Production Budget:
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7-219
157.
Weldon Industrial Gas Corporation supplies acetylene and other compressed gases to
industry. Data regarding the store’s operations follow:
o Sales are budgeted at $360,000 for November, $380,000 for December, and $350,000 for
January.
o Collections are expected to be 75% in the month of sale, 20% in the month following the
sale, and 5% uncollectible.
o The cost of goods sold is 65% of sales.
o The company desires an ending merchandise inventory equal to 60% of the cost of goods
sold in the following month.
o Payment for merchandise is made in the month following the purchase.
o Other monthly expenses to be paid in cash are $21,900.
o Monthly depreciation is $20,000.
o Ignore taxes.
Balance Sheet
October 31
Assets
Cash
$16,000
Accounts receivable (net of allowance for uncollectible accounts)
74,000
Merchandise inventory
140,400
Property, plant and equipment (net of $500,000 accumulated depreciation)
1,066,000
Total assets
$1,296,400
Liabilities and Stockholders’ Equity
Accounts payable
$240,000
Common stock
640,000
Retained earnings
416,400
Total liabilities and stockholders’ equity
$1,296,400
Sales
Schedule of Expected Cash Collections
Accounts receivable
November sales (75% × $360,000; 20% × $360,000)
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.
a.
