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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
