Exercise 20-22 (30 minutes)
Mike’s Motors Corp.
Cash Budget
For July, August, and September
July August September
Beginning cash balance $34,000 $30,000 $30,000
Cash receipts 85,000 111,000 150,000
Total cash available 119,000 141,000 180,000
Cash disbursements (113,000) (99,900) (127,400)
Interest expense (2% per month) 0 (480) (268)
1. Merchandise Purchases Budget
Note: Shaded numbers represent known information provided in the
exercise.
Walker Company
Merchandise Purchases Budget
For July, August, and September
July August September
Next month’s budgeted sales.............. 315,000 270,000 200,000 (10)
Ratio of inventory to next month sales. x 15% (9) x 15% (9) x 15% (9)
Budgeted ending inventory…….……….. 47,250 (6) 40,500 (3) 30,000
The following notes (1) through (10) provide supporting calculations and explanations.
Notes: (1) September required units
Ending inventory 30,000
Add budgeted sales 270,000
Total required in September 300,000
(2) September beginning Inventory
(3) September Beginning Inventory = August Ending Inventory
(4) August required units
Ending inventory 40,500
Financial and Managerial Accounting, 6th Edition
Exercise 20-23 (concluded)
Notes: concluded
(5) August beginning inventory
Total required (4 above) 355,500
Less budgeted purchases (308,250)
August beginning inventory 47,250
(6) August Beginning Inventory = July Ending Inventory
(7) July required units
(9) Percent of Sales to be held as Ending Inventory
Ending inventory for August
September Sales
= 40,500 = 15%
270,000
This percentage is constant for the three months.
2. Monthly ending inventory is 15% of next month’s sales (see note #9).
Exercise 20-24 (25 minutes)
ACCO COMPANY
Cash Budget
For Month Ended July 31
Beginning cash balance………………….…………..…….…..$ 50,000
Cash receipts from sales (note 1)……………………………. 1,364,000
Total cash available……………………….…..…….…….…….. $1,414,000
Cash disbursements
Total cash disbursements………………………..…….……... 1,291,600
Ending cash balance…………………..….……..…….…….…. $ 122,400
Supporting calculations
(1) Cash receipts in July from sales
From May sales ($1,720,000 x 20%)….……..... $ 344,000
From June sales ($1,200,000 x 50%)………….. 600,000
From July sales ($1,400,000 x 30%)…….…..… 420,000
Total………..………….…………………..……………….. $1,364,000
(2) Cash disbursements in July for merchandise
Financial and Managerial Accounting, 6th Edition
Exercise 20-25 (45 minutes)
ACCO COMPANY
Budgeted Income Statement
For Month Ended July 31
Sales (from Exercise 20-24)……………….……..….…….…….…. $1,400,000
Cost of goods sold (note 1)………………………………….…… 770,000
Gross profit………………………………………..………….…….… 630,000
Operating expenses
Income before taxes………………….……………………………. 102,400
Income tax expense (note 3)…………….………….…….….…. 30,720
Net income……………..…………………………..….…….…….…. $ 71,680
Supporting calculations
(1) Cost of goods sold
(2) Salaries expense
Cash paid…….………………….……………….………. $ 275,000
Less beginning payable…….………….…………… (50,000)
Plus ending payable…….………….……………..…. 60,000
Salaries expense…..………………….………….…… $ 285,000
(3) Income tax expense
Pre-tax income…….………….………….…………..…$ 102,400
Exercise 20-25 (Continued)
ACCO COMPANY
Budgeted Balance Sheet
As of July 31
ASSETS
Cash (from Exercise 20-24)…………………………………………. $ 122,400
Accounts receivable (note 1)……………………..…….….….. 1,220,000
Inventory (given)…………………………………….…….…..……. 60,000
Total current assets…………………….…….…….…….……... 1,402,400
Equipment………………………………………….………………….$1,600,000
Total current liabilities………………..……………………….. 390,720
Bank loan payable……………….……..….….….…….……... 660,000 1,050,720
Stockholders’ equity
Common stock…………..………………………………..……... 600,000
Retained earnings (note 4)…………………………………..… 1,035,680 1,635,680
Total liabilities and equity……………..……..…….…….…… $2,686,400
Supporting calculations
(1) Accounts receivable
(3) Accounts payable
Purchases………………………………………..………..……….$ 750,000
Percent unpaid……………………………………………………. 40%
Payable……………………………………..………………………..$ 300,000
(4) Retained earnings
Financial and Managerial Accounting, 6th Edition
Exercise 20-26 (30 minutes)
Preliminary calculations (sales, cost of sales, beginning and ending inventory)
August September October November
Sales………………………………………...…..……. $325,000 $ 320,000 $250,000 $310,000
Cost to sales percent……..........…..........…. x 60% x 60% x 60% x 60%
Cost of goods sold………..……....…........….. 195,000 192,000 150,000 186,000
Merchandise purchases budgets (* denotes from preliminary calculations)
August September October
Budgeted ending inventory (*)……………………$ 38,400 $ 30,000 $ 37,200
Add budgeted cost of goods sold (*)…..…….. 195,000 192,000 150,000
Cash payments for purchases (on accounts) in October
Dollars Percent Paid
For purchases from August…..….…….…….....$194,400 15% $ 29,160
For purchases from September……….….…….183,600 35 64,260
For purchases from October………………….….157,200 50 78,600
Total cash payments for purchases…........... $172,020
Exercise 20-27 (25 minutes)
1. Budgeted merchandise purchases
June July August
Ending accounts payable……………………..$ 200,000 $ 235,000 $ 195,000
Cash paid on accounts payable............... 1,490,000 1,425,000 1,495,000
Total payable during month…….…….……..1,690,000 1,660,000 1,690,000
2. Budgeted cost of goods sold
June July August
Beginning inventory……..…….…….…….…..$ 250,000 $ 400,000 $ 300,000
Plus purchases…………………………………….1,540,000 1,460,000 1,455,000
Exercise 20-28 (40 minutes)
1.
Preliminary calculations (sales, cost of sales, beginning inventory)
July August September October November
Budgeted sales………..…...........…...$350,000 $290,000 $320,000 $275,000 $265,000
Cost to sales percent…..................x 70% x 70% x 70% x 70% x 70%
Budgeted merchandise purchases
July August September October
Budgeted ending inventory…….………..$ 40,600 $ 44,800 $ 38,500 $ 37,100
Budgeted cost of goods sold…….…….. 245,000 203,000 224,000 192,500
Budgeted purchases……..…………...……$236,600 $207,200 $217,700 $191,100
2.
Budgeted payments on accounts payable in September
Purchases Percent Paid Dollars Paid
For purchases from September…........ $217,700 25% $ 54,425
For purchases from August….............. 207,200 60 124,320
For purchases from July…….………….… 236,600 15 35,490
Total payments…………………….………….. $214,235
Budgeted payments on accounts payable in October
Purchases Percent Paid Dollars Paid
3.
Budgeted balance of accounts payable at the end of September
Purchases Percent Unpaid Dollars Unpaid
From purchases in September…….…...$217,700 75% $163,275
From purchases in August………………. 207,200 15 31,080
Total………..………….…………………..………. $194,355
Budgeted balance of accounts payable at the end of October
Purchases Percent Unpaid Dollars Unpaid
From purchases in October.................$191,100 75% $143,325
Financial and Managerial Accounting, 6th Edition
Exercise 20-29 (10 minutes)
HECTOR COMPANY
Budgeted Cash Disbursements
For August and September
August Sept.
Payments for merchandise*………………..…………………………..$14,400 $19,200
Selling expenses (10% of sales)…………..…………………….……7,200 6,600
**Equals prior month’s purchases. Note that depreciation expense is excluded since it is
a non-cash expense.
Exercise 20-30 (25 minutes)
CASTOR, INC.
Cash Budget
For April, May, and June
April May June
Beginning cash balance*…………….…….…… $12,000 $12,000 $12,279
Cash receipts**……………...….…….….….…….. 28,000 36,000 32,000
Total cash available ……………………….…..…. 40,000 48,000 44,279
Cash disbursements
Interest on bank loan
April ($2,000 x 1%)………………….….….….…
May ($6,060 x 1%)…………..………….……..…
Preliminary cash balance …..…….…….........
20
______
$7,940
61
$18,339
_______
$16,199
Additional loan from bank….….…….…….….. 4,060
Repayment of loan to bank………………….….
_______ 6,060 _______
Financial and Managerial Accounting, 6th Edition