Exercise 20-21 (15 minutes)
PTO MANUFACTURING COMPANY
Cash Budget
For Month Ended September 30
Beginning cash balance……………………………..…….……$ 40,000
Other expenses…………………………………………….…….. 60,000
Accrued taxes…………………………………….…….…….….. 10,000
Interest on bank loan……………………………………….….. 1,000
Total cash disbursements………………………..….…….….. 210,500
Ending cash balance…………………….…….…….…….……. $ 84,500
*($80,000 x 35%) + ($110,000 x 65%)
Exercise 22-22 (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)
Loan balance, Beg. of month $0 $24,000 $13,380
Additional loan (loan repayment) 24,000 (10,620) (13,380)
Loan balance, Month-end $24,000 $13,380 $0
Exercise 22-23 (30 minutes)
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)
Less beginning inventory…………….….. 27,000 (8) 47,250 (5) 40,500 (2)
Budgeted merchandise purchases..... 200,250 308,250 259,500
The following notes (1) through (10) provide supporting calculations and explanations.
Notes: (1) September required units
Less budgeted purchases (259,500)
September beginning inventory 40,500
(3) September Beginning Inventory = August Ending Inventory
(4) August required units
Ending inventory 40,500
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
Less budgeted purchases (200,250)
July beginning inventory 27,000
(9) Percent of Sales to be held as Ending Inventory
Ending inventory for August
September Sales
= 40,500 = 15%
270,000
2. Monthly ending inventory is 15% of next month’s sales (see note #9).
3. October budgeted sales = 200,000 (see note #10 above).
Exercise 22-24 (25 minutes)
ACCO COMPANY
Cash Budget
For Month Ended July 31
Salaries……………………………………………..…….…….…… 275,000
Other expenses…………………………………………….…….. 200,000
Accrued taxes…………………………………….…….…….….. 80,000
Interest on bank loan……………………………………….….. 6,600
Total cash disbursements………………………..….…….….. 1,291,600
Ending cash balance…………………….…….…….…….……. $ 122,400
Supporting calculations
(2) Cash disbursements in July for merchandise
For June purchases ($700,000 x 40%)……..… $ 280,000
For July purchases ($750,000 x 60%)……...... 450,000
Total………………………………….………………….….. $ 730,000
Exercise 22-25 (45 minutes)
ACCO COMPANY
Budgeted Income Statement
For Month Ended July 31
Sales (from Exercise 22-24)……………………….…….…….……. $1,400,000
Income tax expense (note 3)…………………..…….…….……. 30,720
Net income………………………………………………….…….…… $ 71,680
Supporting calculations
(1) Cost of goods sold
Sales…..………….……………………………..…..…….. $1,400,000
Cost percent…….…………………….…………………. 55%
Cost of goods sold…………..……………….…..….. $ 770,000
(2) Salaries expense
(3) Income tax expense
Pre-tax income……..………….……………………….. $ 102,400
Tax rate…………………….……………..………..…..…. 30%
Income tax expense……………….…..…..………... $ 30,720
Exercise 22-25 (Continued)
ACCO COMPANY
Budgeted Balance Sheet
As of July 31
ASSETS
Cash (from Exercise 22-24)…………………………………………. $ 122,400
Accounts receivable (note 1)…………………..…….…….….. 1,220,000
Inventory (given)………………………………………….…….…… 60,000
Liabilities
Accounts payable (note 3)……………………..…….…….….$ 300,000
Salaries payable………………………………………………….. 60,000
Income taxes payable……………………………………….…. 30,720
Total current liabilities…………………………………..….…. 390,720
Bank loan payable………………………..…….…….…….….. 660,000 1,050,720
(1) Accounts receivable
June sales (20% x $1,200,000)………………………………$ 240,000
July sales (70% x $1,400,000)……………..……..…..….. 980,000
Total……………………………………………………….….……….$ 1,220,000
(2) Accumulated depreciation
Percent unpaid……………………………………………………. 40%
Payable………………………………………………………………. $ 300,000
(4) Retained earnings
Beginning……………………………………………………….….. $ 964,000
Net income…………………………………………………………. 71,680
Exercise 22-26 (30 minutes)
Preliminary calculations (sales, cost of sales, beginning and ending inventory)
August September October November
Sales………………………………………….….……. $325,000 $ 320,000 $250,000 $310,000
Merchandise purchases budgets (* denotes from preliminary calculations)
August September October
Budgeted ending inventory (*)……………….…..$ 38,400 $ 30,000 $ 37,200
Cash payments for purchases (on accounts) in October
Dollars Percent Paid
For purchases from August….….…….…….…..$194,400 15% $ 29,160
Exercise 22-27 (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
2. Budgeted cost of goods sold
June July August
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 cost of goods sold........245,000 203,000 224,000 192,500 185,500
Budgeted inventory percent..........x 20% x 20% x 20% x 20% x 20%
Budgeted beginning inventory..…....
$ 49,000 $ 40,600 $ 44,800 $ 38,500 $ 37,100
Budgeted merchandise purchases
July August September October
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
Budgeted balance of accounts payable at the end of October
Purchases Percent Unpaid Dollars Unpaid
