Exercise 7-13 (30 minutes)
1. Schedule of expected cash collections:
Month
July
August
September
Quarter
From accounts receivable .
$136,000
$136,000
From July sales:
From August sales:
From September sales:
Total cash collections …….
2. a. Merchandise purchases budget:
July
August
Sept.
Total
$126,000
$138,000
$132,000
$396,000
b. Schedule of cash disbursements for purchases:
July
August
Sept.
Total
From accounts payable ……….
$ 71,100
$ 71,100
For July purchases ……………..
$ 64,120
For August purchases …………
For September purchases ……
Total cash disbursements …….
$136,080
Exercise 7-13 (continued)
3.
Beech Corporation
Income Statement
For the Quarter Ended September 30
Sales ($210,000 + $230,000 + $220,000) ..
$660,000
Net operating income…………………………..
4.
Beech Corporation
Balance Sheet
September 30
Assets
Cash ($90,000 + $675,000 – $339,820 – ($55,000 ×
3)) ……………………………………………………….…..
$260,180
Accounts receivable ($220,000 × 55%) …………………
Inventory (Part 2a) ……………………………………………
Accounts payable ($134,400 × 70%) …………………….
Common stock (Given) ………………………………………
Retained earnings ($99,900 + $84,000) …………………
Exercise 7-14 (30 minutes)
1.
Jessi Corporation
Sales Budget
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
Budgeted unit sales ……………..
11,000
12,000
14,000
13,000
50,000
Selling price per unit …………….
Total sales …………………………
Schedule of Expected Cash Collections
Beginning accounts receivable .
$ 70,200
$ 70,200
$ 59,400
188,100
205,200
239,400
Total cash collections ……………
Exercise 7-14 (continued)
2.
Jessi Corporation
Production Budget
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
Budgeted unit sales ……………..
11,000
12,000
14,000
13,000
50,000
Total needs ………………………..
Exercise 7-15 (20 minutes)
1.
Hruska Corporation
Direct Labor Budget
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Year
Required production in units ……..
12,000
10,000
13,000
14,000
49,000
Direct labor cost per hour …………
Total direct labor cost ………………
$24,000
$31,200
$33,600
2.
Hruska Corporation
Manufacturing Overhead Budget
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Year
Budgeted direct labor-hours ………
2,400
2,000
2,600
2,800
9,800
Fixed manufacturing overhead …..
Total manufacturing overhead …..
90,200
89,500
90,550
90,900
Less depreciation ……………………
Exercise 7-16 (30 minutes)
1.
Zan Corporation
Direct Materials Budget
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
Required production in units of
finished goods …………………………….
5,000
8,000
7,000
6,000
26,000
Units of raw materials needed to meet
Add desired units of ending raw
inventory ……………………………………
Units of raw materials to be
Cost of raw materials to be
Units of raw materials needed per unit
Exercise 7-16 (continued)
Schedule of Expected Cash Disbursements for Materials
Beginning accounts payable ………
$ 2,880
$ 2,880
1st Quarter purchases ……………..
36,000
60,000
2nd Quarter purchases …………….
74,400
3rd Quarter purchases ……………..
4th Quarter purchases ……………..
31,680
31,680
2.
Zan Corporation
Direct Labor Budget
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Year
Required production in units ……..
5,000
8,000
7,000
6,000
26,000
Direct labor-hours per unit ………..
Total direct labor-hours needed….
Direct labor cost per hour …………
Total direct labor cost ………………
Problem 7-17A (45 minutes)
1. Schedule of cash receipts:
Cash sales—May …………………………………………
$ 60,000
Collections on account receivable:
70,000
Total cash receipts ………………………………………
$184,000
Schedule of cash payments for purchases:
April 30 accounts payable balance ………………….
$ 63,000
May purchases (40% × $120,000) …………………
48,000
Total cash payments ……………………………………
$111,000
Minden Company
Cash Budget
For the Month of May
Beginning cash balance ……………………………….
$ 9,000
Add collections from customers (above) …………..
184,000
Total cash available ……………………………………..
193,000
Less cash disbursements:
Purchase of inventory (above) …………………….
Total cash disbursements ……………………………..
189,500
Excess of cash available over disbursements …….
Financing:
Total financing ……………………………………………
Ending cash balance ……………………………………
Problem 7-17A (continued)
2.
Minden Company
Budgeted Income Statement
For the Month of May
Sales ……………………………………………….
$200,000
Cost of goods sold:
Cost of goods sold ………………………………
Gross margin ……………………………………..
Net operating income ………………………….
Interest expense …………………………..……
Net income ……………………………………….
3.
Minden Company
Budgeted Balance Sheet
May 31
Assets
Cash ……………………………………………………………….
$ 8,900
Accounts receivable (50% × $140,000) ………………….
70,000
Inventory …………………………..…………………………….
40,000
Total assets ………………………………………………………
Accounts payable (60% × 120,000) ……………………….
Note payable …………………………………………………….
Common stock ………………………………………………….
Retained earnings ($42,500 + $15,900) ………………….
Problem 7-18A (45 minutes)
1. Schedule of cash receipts:
Cash sales—May …………………………………………
$ 60,000
Collections on account receivable:
96,000
Total cash receipts ………………………………………
$210,000
Schedule of cash payments for purchases:
April 30 accounts payable balance ………………….
$ 63,000
May purchases (50% × $120,000) …………………
60,000
Total cash payments ……………………………………
$123,000
Minden Company
Cash Budget
For the Month of May
Beginning cash balance ……………………………….
$ 9,000
Add collections from customers (above) …………..
210,000
Total cash available ……………………………………..
219,000
Less cash disbursements:
Purchase of inventory (above) …………………….
Total cash disbursements ……………………………..
201,500
Excess of cash available over disbursements …….
Financing:
Total financing ……………………………………………
Ending cash balance ……………………………………
Problem 7-18A (continued)
2.
Minden Company
Budgeted Income Statement
For the Month of May
Sales ……………………………………………….
$220,000
Cost of goods sold:
Cost of goods sold ………………………………
Gross margin ……………………………………..
Net operating income ………………………….
Interest expense …………………………..……
Net income ……………………………………….
3.
Minden Company
Budgeted Balance Sheet
May 31
Assets
Cash ……………………………………………………………….
$ 22,900
Accounts receivable (40% × $160,000) ………………….
64,000
Inventory …………………………..…………………………….
Total assets ………………………………………………………
Accounts payable (50% × 120,000) ……………………….
Note payable …………………………………………………….
Capital stock …………………………………………………….
Retained earnings ($42,500 + $35,900) ………………….
Problem 7-19A (30 minutes)
1.
December cash sales …………………………….
$ 83,000
Collections on account:
October sales: $400,000 × 18% ……………
November sales: $525,000 × 60% …………
2.
Payments to suppliers:
December purchases: $280,000 × 30% ….
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:
Selling and administrative expenses* ………….
New web server ……………………………………..
Dividends paid ……………………………………….
9,000
Total cash disbursements …………………………...
Financing:
Borrowings ……………………………………………
100,000
Total financing ………………………………………….
100,000
Ending cash balance ………………………………….
$ 20,000
Problem 7-20A (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
not given any basis for his goals, so one cannot know whether they are
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
Problem 7-20A (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
costs that are fixed, there is little hope for a reduction as a consequence
Problem 7-21A (45 minutes)
1. Schedule of expected cash collections:
Month
April
May
June
Quarter
From accounts receivable .
$120,000
$ 16,000
$136,000
From May sales:
Problem 7-21A (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
210,000
Payroll …………………..
Lease payments ………
Advertising …………….
Equipment purchases .
242,000
312,000
315,000
869,000
disbursements ………..
50,000
20,000
Financing:
Borrowings …………….
Repayments …………..
Interest …………………
(1,200)
(1,200)
Total financing ………….
(1,200)
Ending cash balance …..
$ 22,000
$ 26,000
$ 18,800
$ 18,800
3. If the company needs a minimum cash balance of $20,000 to start each
month, the loan cannot be repaid in full by June 30. Some portion of the
loan balance will have to be carried over to July.
Problem 7-22A (60 minutes)
1. Collections on sales:
April
May
June
Quarter
Cash sales …………………..
$120,000
$180,000
$100,000
$ 400,000
Sales on account:
Total cash collections …….
2. a. Merchandise purchases budget:
April
May
June
July
Budgeted cost of goods sold ….
$420,000
$630,000
$350,000
$280,000
Total needs ………………………..
Less beginning merchandise
84,000
70,000
Required inventory purchases…
$462,000
$574,000
$336,000
Add desired ending
b. Schedule of expected cash disbursements for merchandise purchases:
April
May
June
Quarter
April purchases ……
May purchases …….
June purchases ……
Total cash
Beginning accounts
Problem 7-22A (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:
120,000
242,000
Financing:
Total financing …………………
130,000
Ending cash balance …………
$ 40,000
Problem 7-23A (60 minutes)
1. Collections on sales:
April
May
June
Quarter
Cash sales …………………..
$120,000
$180,000
$100,000
$ 400,000
Sales on account:
Total cash collections …….
2. a. Merchandise purchases budget:
April
May
June
July
Budgeted cost of goods sold ….
$420,000
$630,000
$350,000
$280,000
Total needs ………………………..
Less beginning merchandise
84,000
52,500
Required inventory purchases…
Add desired ending
b. Schedule of expected cash disbursements for merchandise purchases:
April
May
June
Quarter
Beginning accounts
payable ……………
$126,000
$ 126,000
April purchases ……
May purchases …….
June purchases ……
Total cash
Problem 7-23A (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:
49,000
677,250
546,750
252,750
209,750
Financing:
Total financing …………………
Ending cash balance …………
$ 208,460
4. Collecting accounts receivable sooner and reducing inventory levels