Problem 22-6B (50 minutes)
SONY STEREO
Cash Budgets
For April, May, and June
April May June
Cash disbursements
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
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
Payments on credit purchases** March April May June
March purchases ($100,000)—(0%: 80%: 20%)…….……....…....…....…....$ 0 $ 80,000 $ 20,000 $ –
Total……………………………………………………………………………….…….………$ 0 $ 80,000 $188,000 $186,000
Problem 22-7B (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
Total collected………..…….……... $431,530 $425,150
Part 2
Budgeted ending inventories (in units)
January February March April
Next month’s budgeted sales……………..…..22,500 19,000 18,750 21,000
Problem 22-7B (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
431,530 425,150
Total available cash…………………………….….….…….….…….…..
Cash disbursements
Payments on purchases…………………..…….….…….…….….…251,340 228,300
Selling and administrative expenses……………………..……...160,000 160,000
Interest expense*…………………………………………….…….….….
120 0
411,460 388,300
*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 22-8B (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
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 cost per unit….…..………........ $ 30 $ 30 $ 30 $ 30
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%
Problem 22-8B (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
Maintenance………………….….…….….…….…3,000 3,000 3,000 9,000
* 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
Part 5
ISLE CORPORATION
Capital Expenditures Budgets
January, February, and March 2016
January February March
Equipment purchases……………………………………$72,000 $96,000 $ 28,800
Problem 22-8B (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 disbursements
Payments for merchandise (note B)……………….. 72,000 306,000 123,000
Sales commissions………………………………..…… 54,000 72,000 90,000
Sales salaries…………………….…….….…….….…… 7,500 7,500 7,500
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
Note B: Cash payments for merchandise
Credit purchases…………….…………..………..…. $90,000 $255,000 $292,500 $637,500
Accounts payable at 12/31/2015 (20%; 80%). $72,000 $288,000 $360,000
January purchases (20%; 80%)…………..…….. 18,000 $72,000 90,000
February purchases (20%)…………………..……. _______ _______ 51,000 51,000
Problem 22-8B (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
Interest expense…………………….…….….…….….…….…. 150 305,075
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
Total current assets……………….….…….….. 549,000
Taxes payable (due 4/15/2016)……..…….… 21,970 Income stmt.
Total liabilities.…..……………………………….. 595,420
Common stock………………….…….….…….…$472,500 Unchanged
Retained earnings……………………….…….… 278,955 Note H
Total stockholders’ equity………….…….….. 751,455
Total liabilities and equity..….….……......... $1,346,875
Problem 22-8B (Concluded)
Supporting Footnotes
Note C
Beginning receivables…………………………………………………….…..$ 525,000
Credit sales………………………………………………………………………… 810,000
Less collections……………………………………………………….………... (889,500)
Ending receivables…….……..……..…….……..…..…....…....…....…....$ 445,500
Note F
Beginning accumulated depreciation…………………………………...$ 67,500
Depreciation expense…………………………………………….…….…….. 21,425
Total……………………………………………………………………………………$ 88,925
Note G
Beginning accounts payable………………………………………………..$ 360,000
Purchases…………………………………………………………………….….… 637,500
Payments………………………………………………………………..….……... (501,000)
Ending accounts payable…………………………………………..…….….$ 496,500
Note H