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Solutions Manual, Chapter 8 41
Problem 8-19 (continued)
4.
Minden Company
Bud
g
eted Income Statement
For the Month of May
Sales ………………………………………………. $200,000
Cost of
g
oods sold:
Be
g
innin
g
inventory …………………………. $ 30,000
A
dd purchases ……………………………….. 120,000
5.
Minden Company
Bud
g
eted Balance Sheet
May 31
Assets
Cash (see requirement 3) …………………………………… $ 8,900
A
ccounts receivable (50% × $140,000) …………………. 70,000
T
Liabilities and Stockholders’ Equity
A
ccounts payable (60% × 120,000) ……………………… $ 72,000
Note payable …………………………………………..………. 20,000
g
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42 Managerial Accounting, 16th Edition
Problem 8-20 (45 minutes)
1. Schedule of cash collections:
Cash sales
—
May ……………………………………….. $ 60,000
Collections on account receivable:
A
–
T
2. Schedule of expected cash disbursements:
Schedule of cash payments for purchases:
A
pril 30 accounts payable balance …………………. $ 63,000
T
3.
Minden Company
Cash Bud
g
et
For the Month of May
Be
g
innin
g
cash balance ………………………………. $ 9,000
A
T
Less cash disbursements:
Purchase of inventory (above) ……………………. 123,000
Sellin
g
and administrative expenses …………….. 72,000
T
Financin
g
:
Borrowin
g
—
note …………………………………….. 20,000
Repayments
—
note ………………………………….. (14,500)
T
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Solutions Manual, Chapter 8 43
Problem 8-20 (continued)
4.
Minden Company
Bud
g
eted Income Statement
For the Month of May
Sales ………………………………………………. $220,000
Cost of
g
oods sold:
Be
g
innin
g
inventory …………………………. $ 30,000
A
dd purchases ……………………………….. 120,000
Goods available for sale ……………………. 150,000
Endin
g
inventory …………………………….. 40,000
5.
Minden Company
Bud
g
eted Balance Sheet
May 31
Assets
Cash (see requirement 3) …………………………………… $ 22,900
A
ccounts receivable (40% × $160,000) …………………. 64,000
T
Liabilities and Stockholders’ Equity
A
ccounts payable (50% × 120,000) ……………………… $ 60,000
Note payable …………………………………………..………. 20,000
g
g
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44 Managerial Accounting, 16th Edition
Problem 8-21 (30 minutes)
1. December cash sales ……………………………. $ 83,000
Collections on account:
October sales: $400,000 × 18%…………… 72,000
2. Payments to suppliers:
November purchases (accounts payable)… $161,000
T
3.
A
shton Company
Cash Budget
For the Month of December
Be
g
innin
g
cash balance …………………………….. $ 40,000
A
T
Less cash disbursements:
Payments to suppliers for inventory …………… $245,000
Sellin
g
and administrative expenses* …………. 380,000
T
Financin
g
:
Borrowin
g
s ………………………………………….. 100,000
Repayments …………………………………………. 0
T
T
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Solutions Manual, Chapter 8 45
Problem 8-22 (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
essential to an effective budgeting/control process. The President has
The sales by product line should be based on an accurate sales forecast
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
would participate in the decisions by which the budget is established. In
addition, this approach requires initial and continuing involvement of
The sales forecast should be developed considering internal sales-
forecasts as well as external factors. Costs within departments should be
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46 Managerial Accounting, 16th Edition
Problem 8-22 (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
(one year) is short enough so that many costs are relatively fixed. For
b. budgeted costs were more than adequate for the originally targeted
d. there are discretionary costs that can be delayed or omitted with no
(Adapted unofficial CMA Solution)
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Solutions Manual, Chapter 8 47
Problem 8-23 (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
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48 Managerial Accounting, 16th Edition
Problem 8-23 (continued)
2. Cash budget:
Month
April May June Quarter
Be
g
innin
g
cash balance . $ 24,000 $ 22,000 $ 26,000 $ 24,000
A
dd receipts:
Collections from
customers …………… 210,000 316,000 339,000 865,000
disbursements:
Merchandise
purchases …………… 140,000 210,000 160,000 510,000
Payroll ………………….. 20,000 20,000 18,000 58,000
A
—
—
T
Excess (deficiency) of
cash available over
disbursements ……….. (8,000) 26,000 50,000 20,000
Financin
g
:
Borrowin
g
s ……………. 30,000
—
—
30,000
—
—
—
—
T
—
3. If the company needs a minimum cash balance of $20,000 to start each
T
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Solutions Manual, Chapter 8 49
Problem 8-24 (60 minutes)
1. Collections on sales:
April May June Quarter
Cash sales (@ 20%) …….. $120,000 $180,000 $100,000 $ 400,000
Sales on account:
February: $200,000 ×
80% × 20% ………….. 32,000 32,000
March: $300,000 ×
T
2. a. Merchandise purchases budget:
April May June July
Bud
g
eted cost of
g
oods sold .. $420,000 $630,000 $350,000 $280,000
A
dd desired endin
g
merchandise inventory* …… 126,000 70,000 56,000
T
b. Schedule of expected cash disbursements for merchandise purchases:
April May June Quarter
Be
g
innin
g
accounts
payable …………… $126,000 $ 126,000
A
pril purchases ……. 231,000 $231,000 462,000
A
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50 Managerial Accounting, 16th Edition
Problem 8-24 (continued)
3.
Garden Sales, Inc.
Cash Budget
For the Quarter Ended June 30
April May June Quarter
Be
g
innin
g
cash balance ….. $ 52,000 $ 40,000 $ 40,000 $ 52,000
A
dd collections from
T
Less cash disbursements:
Purchases for inventory … 357,000 518,000 455,000 1,330,000
A
—
—
—
—
T
Excess (deficiency) of cash
available over
disbursements .…………… (90,000) (10,000) 242,000 62,000
Financin
g
:
Borrowin
g
s ………………… 130,000 50,000 0 180,000
Repayments ………….…… 0 0 (180,000) (180,000)
Interest
($130,000 × 1% × 3 +
T