Problem 20-6B (50 minutes)
SONY STEREO
Cash Budgets
For April, May, and June
April May June
Beginning balance……………..……..….……..….. $ 3,000 $ 53,000 $ 44,000
Cash receipts
Payments on accounts payable**…………… 80,000 188,000 186,000
Payroll…………….……………………….….….…….. 16,000 17,000 18,000
Rent………….…………………….………..…….….…. 6,000 6,000 6,000
Other expenses……………..………..….…..…….. 64,000 8,000 7,000
* Interest at 12% on $80,000 for 90 days is $2,400.
Supporting calculations
Collections of credit sales* March April May June
March sales ($180,000)—[25%: 45%: 20%: 9%]…….........$ 45,000 $ 81,000 $ 36,000 $ 16,200
April sales ($220,000)—[25%: 45%: 20%]..…......….......... – 55,000 99,000 44,000
May sales ($300,000)—[25%: 45%]……..……………........…. – – 75,000 135,000
June sales ($380,000)—[25%]………………………………....... – – – 95,000
Total…………………………………………………………………………$ 45,000 $136,000 $210,000 $290,200
Payments on credit purchases** March April May June
Problem 20-7B (70 minutes)
Part 1
Cash collections of credit sales (accounts receivable)
From sales in Total % Collected March April
January…………………………….….$396,000 23% $ 91,080
February……………….….…….…... 495,000 35 173,250
……………………………… 23 $113,850
Part 2
Budgeted ending inventories (in units)
January February March April
Next month’s budgeted sales…………….……22,500 19,000 18,750 21,000
Ratio of inventory to future sales............... 20% 20% 20% 20%
Problem 20-7B (Continued)
Part 4
Cash payments on product purchases (for March and April)
From purchases in Total % Paid March April
February…………………………………$261,600 70% $183,120
March…………………………………..… 227,400 30 68,220
Part 5
CONNICK COMPANY
Cash Budget
March and April
March April
Beginning cash balance………………….……………….…..…….…..$ 50,000 $ 58,070
Cash receipts from customers…………………….…….….…….….
431,530 425,150
Total available cash………………………………..….….…….….……..
481,530 483,220
Preliminary cash balance…………….………………..………….…….
Additional loan…………….………………..……………..….….….……..
Repayment of loan…………………………….………………….…….…. (12,000 ) ________
Ending cash balance………………….…………….…….….…….….…$ 58,070 $ 94,920
Ending loan balance…………..………………………….…….….……..$ 0 $ 0
*Interest expense: March = $12,000 x 12% /12 = $120
Part 6
Analysis Component: Information about the supply of cash in the near future
would be helpful to the management of Connick Company. A good cash
Problem 20-8B (130 minutes)
Part 1
ISLE CORPORATION
Sales Budgets
January, February, and March 2016
Budgeted
Units
Budgeted
Unit Price
Budgeted
Total Dollars
January 2016………………………………..….….….….. 6,000 $45 $ 270,000
Total for the first quarter……………….……..……...24,000 $1,080,000
Part 2
ISLE CORPORATION
Merchandise Purchases Budgets
January, February, and March 2016
January February March Total
Next month’s budgeted sales……………. 8,000 10,000 9,000
Ratio of inventory to future sales......... x 25% x 25% x 25%
Budgeted ending inventory………..…….. 2,000 2,500 2,250
Add budgeted sales…………………………. 6,000 8,000 10,000
Budgeted merchandise purchases
$90,000 $255,000 $292,500 $637,500
Part 3
ISLE CORPORATION
Selling Expense Budgets
January, February, and March 2016
January February March Total
Budgeted sales……………...…..……..…...$270,000 $360,000 $450,000
Sales commission percent..................x 20% x 20% x 20%
Financial and Managerial Accounting, 6th Edition
Problem 20-8B (Continued)
Part 4
ISLE CORPORATION
General and Administrative Expense Budgets
January, February, and March 2016
January February March Total
Salaries……………..………….…….….…..……...$12,000 $12,000 $12,000 $36,000
* Depreciation expense calculations
Annual
Amount January February March Total
Equipment owned
on 12/31/2015…......…......... $67,500 $5,625 $5,625 $5,625 $16,875
Purchased in January......... 9,000 750 750 750 2,250
Part 5
ISLE CORPORATION
Capital Expenditures Budgets
January, February, and March 2016
January February March
Equipment purchases…………………..……………….$72,000 $96,000 $ 28,800
Problem 20-8B (Continued)
Part 6
ISLE CORPORATION
Cash Budgets
January, February, and March 2016
January February March
Beginning cash balance……………….…….….….…. $ 36,000 $182,850 $ 107,850
Cash receipts from customers (note A)…..…........ 382,500 421,500 355,500
General & administrative salaries…..….…........ 12,000 12,000 12,000
Maintenance expense…………….………….….….… 3,000 3,000 3,000
Interest ($15,000 x 1%)..…………………………………… 150
Taxes payable………………….…………………….…... 90,000
Purchases of equipment……….….….…….….…... 72,000 96,000 28,800
Purchase of land……………….……..….……..….…..
________ ________ 150,000
Total cash disbursements………….…….….….….… 220,650 496,500 504,300
Supporting calculations January February March Total
Note A: Cash receipts from customers
Total sales………………………..…..…………..…..… $270,000 $360,000 $450,000 $1,080,000
Cash sales (25%)………………..……..………..…… $ 67,500 $ 90,000 $112,500 $ 270,000
Credit sales (75%)……………………………..……... $202,500 $270,000 $337,500 $ 810,000
Cash collections
Receivables at 12/31/2015 (60%; 40%)........... $315,000 $210,000 $ 525,000
January purchases (20%; 80%)…...…..……..... 18,000 $72,000 90,000
February purchases (20%)…………….……..…… _______ _______ 51,000 51,000
Total paid on purchases…………………….……... $72,000 $306,000 $123,000 $501,000
Financial and Managerial Accounting, 6th Edition
1202
Problem 20-8B (Continued)
Part 7
ISLE CORPORATION
Budgeted Income Statement
For Three Months Ended March 31, 2016
Sales……………..…………………….…………….…………………. $1,080,000
Cost of goods sold (24,000 units @ $30)……….…..…… 720,000
Gross profit…………………………………………………………… 360,000
Operating expenses
Income before taxes………………….…..……..…….….…….. 54,925
Income taxes (40%)……………………………….…………..….. 21,970
Net income……………..………………………………………….…. $ 32,955
Part 8
ISLE CORPORATION
Budgeted Balance Sheet
March 31, 2016
ASSETS
Cash………………………….…….….….….….…... $ 36,000 Cash budget
Accounts receivable…………….…….….……. 445,500 Note C
Inventory………….…………………………..….…. 67,500 Note D
LIABILITIES AND EQUITY
Accounts payable……………………………….. $ 496,500 Note G
Bank loan payable……………….………………. 76,950 Cash budget
Problem 20-8B (Concluded)
Supporting Footnotes
Note C
Beginning receivables…………………………………………..…………….$ 525,000
Credit sales………………………………………………………………………... 810,000
Less collections…………………………………………………….…………… (889,500)
*Also equals 2,250 units @ $30 = $67,500
Note E
Beginning equipment……………..……………….…........…........…......$ 540,000
Purchased in January…………………………………………………..…….. 72,000
Purchased in February………..……..……………….….....…........…..... 96,000
Purchased in March………………………………………………….………… 28,800
Total……………………………………………………………………………………$ 736,800
Note F
Beginning accumulated depreciation……………..…………………....$ 67,500
Depreciation expense…………………………………………….…………… 21,425
Total……………………………………………………………………………………$ 88,925
Financial and Managerial Accounting, 6th Edition