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Solutions Manual, Chapter 9 31
Problem 9-18 (continued)
2.
Minden Company
Budgeted Income Statement
For the Month of May
Sales .......................................................
$220,000
Cost of goods sold:
Beginning inventory ...............................
$ 30,000
Add purchases .......................................
120,000
Goods available for sale ..........................
150,000
Ending inventory ....................................
40,000
Cost of goods sold ....................................
110,000
Gross margin ............................................
110,000
Selling and administrative expenses
($72,000 + $2,000) ...............................
74,000
Net operating income ...............................
36,000
Interest expense ......................................
100
Net income ..............................................
$ 35,900
3.
Minden Company
Budgeted Balance Sheet
May 31
Assets
Cash .........................................................................
$ 22,900
Accounts receivable (40% × $160,000) ......................
64,000
Inventory ..................................................................
40,000
Buildings and equipment, net of depreciation
($207,000 + $6,500 – $2,000) .................................
211,500
Total assets ...............................................................
$338,400
Liabilities and Stockholders’ Equity
Accounts payable (50% × 120,000) ............................
$ 60,000
Note payable .............................................................
20,000
Capital stock .............................................................
180,000
Retained earnings ($42,500 + $35,900) ......................
78,400
Total liabilities and stockholders’ equity .......................
$338,400
32 Managerial Accounting for Managers, 4th Edition
Problem 9-19 (30 minutes)
1.
December cash sales ..................................
$ 83,000
Collections on account:
October sales: $400,000 × 18% ...............
72,000
November sales: $525,000 × 60% ............
315,000
December sales: $600,000 × 20% ............
120,000
Total cash collections ...............................
$590,000
2.
Payments to suppliers:
November purchases (accounts payable) ...
$161,000
December purchases: $280,000 × 30% ....
84,000
Total cash payments ................................
$245,000
3.
Ashton Company
Cash Budget
For the Month of December
Beginning cash balance ...................................
$ 40,000
Add collections from customers ........................
590,000
Total cash available ..........................................
630,000
Less cash disbursements:
Payments to suppliers for inventory ...............
$245,000
Selling and administrative expenses* .............
380,000
New web server ............................................
76,000
Dividends paid ..............................................
9,000
Total cash disbursements .................................
710,000
Excess (deficiency) of cash available over
disbursements ..............................................
(80,000)
Financing:
Borrowings ...................................................
100,000
Repayments .................................................
0
Interest ........................................................
0
Total financing .................................................
100,000
Ending cash balance ........................................
$ 20,000
Solutions Manual, Chapter 9 33
Problem 9-20 (30 minutes)
1. The budget at Springfield is an imposed “top-down” budget that fails to
consider both the need for realistic data and the human interaction
gathering and manipulation of data. This suggests there will be little
enthusiasm for implementing the budget.
The initial meeting between the Vice President of Finance, Executive
2. Springfield should consider adopting a “bottom-up” budget process. This
means that the people responsible for performance under the budget
operates. Although time consuming, the approach should produce a
more acceptable, honest, and workable goal-control mechanism.
discretionary and nondiscretionary. Flexible budgeting techniques could
34 Managerial Accounting for Managers, 4th Edition
Problem 9-20 (continued)
3. The functional areas should not necessarily be expected to cut costs
when sales volume falls below budget. The time frame of the budget
a. control is exercised over the costs within their function.
sales, i.e., slack was present.
serious effect on the department.
(Adapted unofficial CMA Solution)
Solutions Manual, Chapter 9 35
Problem 9-21 (45 minutes)
1. Schedule of expected cash collections:
Month
April
May
June
Quarter
From accounts receivable .
$120,000
$ 16,000
$136,000
From April sales:
30% × $300,000 ..........
90,000
90,000
60% × $300,000 ..........
180,000
180,000
8% × $300,000 ............
$ 24,000
24,000
From May sales:
30% × $400,000 ..........
120,000
120,000
60% × $400,000 ..........
240,000
240,000
From June sales:
30% × $250,000 ..........
75,000
75,000
Total cash collections .......
$210,000
$316,000
$339,000
$865,000
36 Managerial Accounting for Managers, 4th Edition
Problem 9-21 (continued)
2. Cash budget:
Month
April
May
June
Quarter
Beginning cash balance
$ 24,000
$ 22,000
$ 26,000
$ 24,000
Add receipts:
Collections from
customers ...............
210,000
316,000
339,000
865,000
Total cash available ......
234,000
338,000
365,000
889,000
Less cash
disbursements:
Merchandise
purchases ...............
140,000
210,000
160,000
510,000
Payroll .......................
20,000
20,000
18,000
58,000
Lease payments .........
22,000
22,000
22,000
66,000
Advertising ................
60,000
60,000
50,000
170,000
Equipment purchases .
—
—
65,000
65,000
Total cash
disbursements ...........
242,000
312,000
315,000
869,000
Excess (deficiency) of
cash available over
disbursements ...........
(8,000)
26,000
50,000
20,000
Financing:
Borrowings ................
30,000
—
—
30,000
Repayments ..............
—
—
(30,000)
(30,000)
Interest .....................
—
—
(1,200)
(1,200)
Total financing .............
30,000
—
(31,200)
(1,200)
Ending cash balance .....
$ 22,000
$ 26,000
$ 18,800
$ 18,800
loan balance will have to be carried over to July.
Solutions Manual, Chapter 9 37
Problem 9-22 (60 minutes)
1. Collections on sales:
April
May
June
Quarter
Cash sales .......................
$120,000
$180,000
$100,000
$ 400,000
Sales on account:
February: $200,000 ×
80% × 20% ...............
32,000
32,000
March: $300,000 ×
80% × 70%, 20% ......
168,000
48,000
216,000
April: $600,000 × 80%
× 10%, 70%, 20% .....
48,000
336,000
96,000
480,000
May: $900,000 × 80%
× 10%, 70% ..............
72,000
504,000
576,000
June: $500,000 × 80%
× 10% .......................
40,000
40,000
Total cash collections .......
$368,000
$636,000
$740,000
$1,744,000
2. a. Merchandise purchases budget:
April
May
June
July
Budgeted cost of goods sold ....
$420,000
$630,000
$350,000
$280,000
Add desired ending
merchandise inventory* ........
126,000
70,000
56,000
Total needs .............................
546,000
700,000
406,000
Less beginning merchandise
inventory ..............................
84,000
126,000
70,000
Required inventory purchases...
$462,000
$574,000
$336,000
b. Schedule of expected cash disbursements for merchandise purchases:
April
May
June
Quarter
Beginning accounts
payable ...............
$126,000
$ 126,000
April purchases ......
231,000
$231,000
462,000
May purchases .......
287,000
$287,000
574,000
June purchases ......
168,000
168,000
Total cash
disbursements .....
$357,000
$518,000
$455,000
$1,330,000
38 Managerial Accounting for Managers, 4th Edition
Problem 9-22 (continued)
3.
Garden Sales, Inc.
Cash Budget
For the Quarter Ended June 30
April
May
June
Quarter
Beginning cash balance ........
$ 52,000
$ 40,000
$ 40,000
$ 52,000
Add collections from
customers .........................
368,000
636,000
740,000
1,744,000
Total cash available ..............
420,000
676,000
780,000
1,796,000
Less cash disbursements:
Purchases for inventory .....
357,000
518,000
455,000
1,330,000
Selling expenses ...............
79,000
120,000
62,000
261,000
Administrative expenses ....
25,000
32,000
21,000
78,000
Land purchases .................
—
16,000
—
16,000
Dividends paid ..................
49,000
—
—
49,000
Total cash disbursements ...
510,000
686,000
538,000
1,734,000
Excess (deficiency) of cash
available over
disbursements ..................
(90,000)
(10,000)
242,000
62,000
Financing:
Borrowings .......................
130,000
50,000
0
180,000
Repayments ......................
0
0
(180,000)
(180,000)
Interest
($130,000 × 1% × 3 +
$50,000 × 1% × 2) ........
0
0
(4,900)
(4,900)
Total financing .....................
130,000
50,000
(184,900)
(4,900)
Ending cash balance ............
$ 40,000
$ 40,000
$ 57,100
$ 57,100
Solutions Manual, Chapter 9 39
Problem 9-23 (60 minutes)
1. Collections on sales:
April
May
June
Quarter
Cash sales .......................
$120,000
$180,000
$100,000
$ 400,000
Sales on account:
February: $200,000 ×
80% × 20% ...............
32,000
32,000
March: $300,000 ×
80% × 70%, 20% ......
168,000
48,000
216,000
April: $600,000 × 80%
× 25%, 65%, 10% .....
120,000
312,000
48,000
480,000
May: $900,000 × 80%
× 25%, 65% ..............
180,000
468,000
648,000
June: $500,000 × 80%
× 25% .......................
100,000
100,000
Total cash collections .......
$440,000
$720,000
$716,000
$1,876,000
2. a. Merchandise purchases budget:
April
May
June
July
Budgeted cost of goods sold ....
$420,000
$630,000
$350,000
$280,000
Add desired ending
merchandise inventory* ........
94,500
52,500
42,000
Total needs .............................
514,500
682,500
392,000
Less beginning merchandise
inventory ..............................
84,000
94,500
52,500
Required inventory purchases...
$430,500
$588,000
$339,500
b. Schedule of expected cash disbursements for merchandise purchases:
April
May
June
Quarter
Beginning accounts
payable ...............
$126,000
$ 126,000
April purchases ......
215,250
$215,250
430,500
May purchases .......
294,000
$294,000
588,000
June purchases ......
169,750
169,750
Total cash
disbursements .....
$341,250
$509,250
$463,750
$1,314,250
40 Managerial Accounting for Managers, 4th Edition
Problem 9-23 (continued)
3.
Garden Sales, Inc.
Cash Budget
For the Quarter Ended June 30
April
May
June
Quarter
Beginning cash balance ........
$ 52,000
$ 40,750
$ 83,500
$ 52,000
Add collections from
customers .........................
440,000
720,000
716,000
1,876,000
Total cash available ..............
492,000
760,750
799,500
1,928,000
Less cash disbursements:
Purchases for inventory .....
341,250
509,250
463,750
1,314,250
Selling expenses ...............
79,000
120,000
62,000
261,000
Administrative expenses ....
25,000
32,000
21,000
78,000
Land purchases .................
—
16,000
—
16,000
Dividends paid ..................
49,000
—
—
49,000
Total cash disbursements ...
494,250
677,250
546,750
1,718,250
Excess (deficiency) of cash
available over
disbursements ..................
(2,250)
83,500
252,750
209,750
Financing:
Borrowings .......................
43,000
0
0
43,000
Repayments ......................
0
0
(43,000)
(43,000)
Interest
($43,000 × 1% × 3) .......
0
0
(1,290)
(1,290)
Total financing .....................
43,000
0
(44,290)
(1,290)
Ending cash balance ............
$ 40,750
$ 83,500
$ 208,460
$ 208,460
4. Collecting accounts receivable sooner and reducing inventory levels
