Problem 9-21 (continued)
2. Cash budget:
Month
July
August
Sept.
Quarter
Cash balance, beginning …
$ 43,000
$ 28,700
$ 24,300
$ 43,000
Add receipts:
Collections from
customers ………………
290,700
355,600
391,000
1,037,300
Total cash available ……….
333,700
384,300
415,300
1,080,300
Less disbursements:
Merchandise purchases ..
160,000
170,000
155,000
485,000
Salaries and wages ……..
70,000
70,000
65,000
205,000
Advertising ………………..
80,000
90,000
100,000
270,000
Rent payments …………..
30,000
30,000
30,000
90,000
Equipment purchases ….
25,000
0
0
25,000
Total disbursements ………
365,000
360,000
350,000
1,075,000
Excess (deficiency) of
receipts over
disbursements ……………
(31,300)
24,300
65,300
5,300
Financing:
Borrowings ……………….
60,000
0
0
60,000
Repayments ………………
0
0
(60,000)
(60,000)
Interest ……………………
0
0
(2,000)
(2,000)
Total financing ……………..
60,000
0
(62,000)
(2,000)
Cash balance, ending …….
$ 28,700
$ 24,300
$ 3,300
$ 3,300
3. If the company needs a $20,000 minimum cash balance to start each
month, then the loan cannot be repaid in full by September 30. If the
loan is repaid in full, the cash balance will drop to only $3,300 on
September 30, as shown above.
Problem 9-22 (45 minutes)
1. Stokes is using the budget as a club to pressure employees and as a
way to find someone to blame rather than as a legitimate planning and
control tool. His planning seems to consist of telling everyone to
increase sales volume by 40%. This kind of “planning” requires no
coupled with a “no excuses” policy and the threat of being fired, create
an ideal breeding ground for questionable business practices. Managers
who would not, under ordinary circumstances, cheat or cut corners may
do so if put under this kind of pressure.
3. As the old saying goes, Keri Kalani is “between a rock and a hard place.”
top management, collaborating with her boss in hiding losses due to
defective disk drives would clearly violate this standard. Apart from the
misrepresentation on the accounting reports, the policy of shipping
defective returned units to customers is bound to have a negative effect
on the company’s reputation. If this policy were to become widely
Ethical Professional Practice suggests that Keri go to the next higher
level in management to present her case. Unfortunately, in the
prevailing moral climate at PrimeDrive, she is unlikely to win any blue
Problem 9-23 (45 minutes)
1. Schedule of expected cash collections:
Month
April
May
June
Quarter
From accounts receivable .
$141,000
$ 7,200
$148,200
From April sales:
20% × 200,000 …………
40,000
40,000
75% × 200,000 …………
150,000
150,000
4% × 200,000 …………..
$ 8,000
8,000
From May sales:
20% × 300,000 …………
60,000
60,000
75% × 300,000 …………
225,000
225,000
From June sales:
20% × 250,000 …………
50,000
50,000
Total cash collections …….
$181,000
$217,200
$283,000
$681,200
