Chapter 04: Financial Forecasting
4.15. Solution:
Bradley Corporation (Continued)
Value of ending
inventory:
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Chapter 04: Financial Forecasting
Or
16. Gross profit and ending inventory (LO2) Sprint Shoes Inc. had a beginning inventory of 9,250 units on January 1, 20X1.
Costs associated with the inventory:
Material…………….. $15.00 per unit
Labor………………… 8.00 per unit
Overhead…………… 7.10 per unit
During 20X1, the firm produced 43,000 units with the following costs:
Material…………….. $17.50 per unit
Labor………………… 8.80 per unit
Overhead…………… 10.30 per unit
Sales for the year were 47,350 units at $44.60 each. Sprint Shoes uses LIFO accounting. What was the gross profit? What was
the value of ending inventory?
4-16. Solution:
Sprint Shoes Inc.
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Chapter 04: Financial Forecasting
Old inventory:
Quantity (units)………… 4,350
Cost per unit…………….. $ 30.10
Total cost of goods
Value of ending
inventory:
Beginning inventory
Or
4,900 units $30.10 = $147,490
17. Schedule of cash receipts (LO2) J. Lo’s Clothiers has forecast credit sales for the fourth quarter of the year as:
September (actual)……………………….. $70,000
Fourth Quarter
October………………………………………. $60,000
November…………………………………… 55,000
December…………………………………… 80,000
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Chapter 04: Financial Forecasting
Experience has shown that 30 percent of sales are collected in the month of sale, 60 percent in the following month, and 10
percent are never collected.
Prepare a schedule of cash receipts for J. Lo’s Clothiers covering the fourth quarter (October through December).
4-17. Solution:
J. Lo’s Clothiers
Septembe
r
October November December
18. Schedule of cash receipts (LO2) Simpson Glove Company has made the following sales projections for the next six months. All
sales are credit sales.
March………………………… $41,000
April………………………….. 50,000
May…………………………… 32,000
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Chapter 04: Financial Forecasting
June…………………………… 47,000
July……………………………. 58,000
August….……………………. 62,000
Sales in January and February were $41,000 and $39,000, respectively. Experience has shown that of total sales receipts 10
percent are uncollectible, 40 percent are collected in the month of sale, 30 percent are collected in the following month, and 20
percent are collected two months after sale.
Prepare a monthly cash receipts schedule for the firm for March through August.
4-18. Solution:
Simpson Glove Company
Cash Receipts Schedule
January February March April May June July August
Sales $41,000 $39,000 $41,000 $50,000 $32,000 $47,000 $58,000 $62,000
(20% of sales
2 months
earlier)
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Chapter 04: Financial Forecasting
receipts
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Chapter 04: Financial Forecasting
19. Schedule of cash receipts (LO2) Watt’s Lighting Stores made the following sales
projection for the next six months. All sales are credit sales.
March………………………… $35,000
April………………………….. 41,000
May…………………………… 30,000
June…………………………… 39,000
July……………………………. 47,000
August….……………………. 49,000
Sales in January and February were $38,000 and $37,000, respectively.
Experience has shown that of total sales, 10 percent are uncollectible, 30 percent are
collected in the month of sale, 40 percent are collected in the following month, and 20
percent are collected two months after sale.
Prepare a monthly cash receipts schedule for the firm for March through August.
Of the sales expected to be made during the six months from March through August,
how much will still be uncollected at the end of August? How much of this is expected to
be collected later?
4-19. Solution:
Watt’s Lighting Stores
Cash Receipts Schedule
January February March April May June July
Sales $38,000 $37,000 $35,000 $41,000 $30,000 $39,000 $47,000
(30% of
current
sales)
(40% of
prior
month’s
sales)
Collections
(20% of
sales 2
months
7,600 7,400 7,000 8,200 6,000
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of McGraw-Hill Education.
Chapter 04: Financial Forecasting
earlier)
receipts
Still due (uncollected) in August:
Bad debts: ($35,000 + 41,000 + 30,000 + 39,000 + 47,000 + 49,000) × .1
= (241,000) × .1 = $24,100
20. Schedule of cash payments (LO2) Ultravision Inc. anticipates sales of $290,000 from
January through April. Materials will represent 50 percent of sales, and because of level
production, material purchases will be equal for each month during the four months of
January, February, March, and April.
Materials are paid for one month after the month purchased. Materials purchased in
December of last year were $25,000 (half of $50,000 in sales). Labor costs for each of the
four months are slightly different due to a provision in the labor contract in which bonuses
are paid in February and April. Here are the labor figures:
January………………………. $15,000
February…………………….. 18,000
March………………………… 15,000
April………………………….. 20,000
Fixed overhead is $11,000 per month. Prepare a schedule of cash payments for January through
April.
4-20. Solution:
Ultravision Inc.
Cash Payment Schedule
Dec. Jan. Feb. March
* Purchases $25,000 $36,250 $36,250 $36,250
** Payment to material
purchases
25,000 36,250 36,250
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Chapter 04: Financial Forecasting
For January through April
* Monthly purchases equal ($290,000 50%)/4 or $145,000/4
$36,250
** Payment is equal to prior month’s purchases.
21. Schedule of cash payments (LO2) The Denver Corporation has forecast the following
sales for the first seven months of the year:
January…………….. $15,000 May……… $15,000
February…………… 17,000 June……… 21,000
March………………. 19,000 July…….. 23,000
April………………… 25,000
Monthly material purchases are set equal to 40 percent of forecast sales for the next month.
Of the total material costs, 50 percent are paid in the month of purchase and 50 percent in
the following month. Labor costs will run $4,500 per month, and fixed overhead is $4,500
per month. Interest payments on the debt will be $3,500 for both March and June. Finally,
the Denver salesforce will receive a 3.00 percent commission on total sales for the first six
months of the year, to be paid on June 30.
Prepare a monthly summary of cash payments for the six-month period from January
through June. (Note: Compute prior December purchases to help get total material
payments for January.)
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