Activity 4: Cash Budget All the purchases of Finnigan Company are made on account. Seventy percent of th purchases are paid on the month of purchase and the remaining 30% are paid the folloo month. Finnigan Co. avails itself of the 5% discount in full provided by the suppliers in all purchases. Sixty percent of the sales of Finnigan Co. are made on account. Eighty percent of the sales on account are made on the month of sale when the customers are granted 2% dissrunt. Eighteen percent of the credit sales are collected the following month, but customers pay beyond the discount period of 10 days from the date of sale. The remaining 2% is consied uncollectible. The following additional data are provided as follows: Operating Expences P 40,000 55,000 60,000 80,000 Sales Purchases Period December 2019 (actual) January 2020 (estimated) February 2020 (estimated) |March 2020 (estimated) P 150,000 P 200,000 250,000 330,000 400,000 190,000 230,000 350,000 The cash balance of the business on January 1, 2020 is P100,000. The business plans to buy additional equipment in February 2020 amounting to P110,000 and will make a 35% down payment on the month of purchase. The balance will be paid the following month.

Activity 4: Cash Budget All the purchases of Finnigan Company are made on account. Seventy percent of th purchases are paid on the month of purchase and the remaining 30% are paid the folloo month. Finnigan Co. avails itself of the 5% discount in full provided by the suppliers in all purchases. Sixty percent of the sales of Finnigan Co. are made on account. Eighty percent of the sales on account are made on the month of sale when the customers are granted 2% dissrunt. Eighteen percent of the credit sales are collected the following month, but customers pay beyond the discount period of 10 days from the date of sale. The remaining 2% is consied uncollectible. The following additional data are provided as follows: Operating Expences P 40,000 55,000 60,000 80,000 Sales Purchases Period December 2019 (actual) January 2020 (estimated) February 2020 (estimated) |March 2020 (estimated) P 150,000 P 200,000 250,000 330,000 400,000 190,000 230,000 350,000 The cash balance of the business on January 1, 2020 is P100,000. The business plans to buy additional equipment in February 2020 amounting to P110,000 and will make a 35% down payment on the month of purchase. The balance will be paid the following month.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

Problem 18E

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Cash budget The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: The company expects to sell about 10% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month following the sale and the remainder the following month (second month following sale). Depreciation, insurance, and property tax expense represent 50,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in January, and the annual property taxes are paid in December. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month. Current assets as of September 1 include cash of 40,000, marketable securities of 75,000, and accounts receivable of 300,000 (60,000 from July sales and 240,000 from August sales). Sales on account for July and August were 200,000 and 240,000, respectively. Current liabilities as of September 1 include 40,000 of accounts payable incurred in August for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of 55,000 will be made in October. Bridgeports regular quarterly dividend of 25,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of 50,000. Instructions Prepare a monthly cash budget and supporting schedules for September, October, and November. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?
A companys sales for the coming months are as follows: About 20 percent of sales are cash sales, and the remainder are credit sales. The company finds that typically 10 percent of a months credit sales are paid in the month of sale, 70 percent are paid the next month, and 15 percent are paid in the second month after sale. Expected cash receipts in July are budgeted at what amount? a. 114,520 b. 143,150 c. 145,720 d. 156,000
Cash budget The controller of Mercury Shoes Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: The company expects to sell about 10% of its merchandise for cash. Of sales on account, 60% are expected to be collected in the month following the sale and the remainder the following month (second month after sale). Depreciation, insurance, and property tax expense represent 12,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in February, and the annual property taxes are paid in November. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month. Current assets as of June 1 include cash of 42,000, marketable securities of 25,000, and accounts receivable of 198,000 (150,000 from May sales and 48,000 from April sales). Sales on account in April and May were 120,000 and 150,000, respectively. Current liabilities as of June 1 include 13,000 of accounts payable incurred in May for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of 24,000 will be made in July. Mercury Shoes regular quarterly dividend of 15,000 is expected to be declared in July and paid in August. Management desires to maintain a minimum cash balance of 40,000. Instructions Prepare a monthly cash budget and supporting schedules for June, July, and August. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?
Pilsner Inc. purchases raw materials on account for use in production. The direct materials purchases budget shows the following expected purchases on account: Pilsner typically pays 25% on account in the month of billing and 75% the next month. Required: 1. How much cash is required for payments on account in May? 2. How much cash is expected for payments on account in June?
Cash Budget The controller of Feinberg Company is gathering data to prepare the cash budget for July. He plans to develop the budget from the following information: a. Of all sales, 40% are cash sales. b. Of credit sales, 45% are collected within the month of sale. Half of the credit sales collected within the month receive a 2% cash discount (for accounts paid within 10 days). Thirty percent of credit sales are collected in the following month; remaining credit sales are collected the month thereafter. There are virtually no bad debts. c. Sales for the second two quarters of the year follow. (Note: The first 3 months are actual sales, and the last 3 months are estimated sales.) d. The company sells all that it produces each month. The cost of raw materials equals 26% of each sales dollar. The company requires a monthly ending inventory of raw materials equal to the coming months production requirements. Of raw materials purchases, 50% is paid for in the month of purchase. The remaining 50% is paid for in the following month. e. Wages total 105,000 each month and are paid in the month incurred. f. Budgeted monthly operating expenses total 376,000, of which 45,000 is depreciation and 6,000 is expiration of prepaid insurance (the annual premium of 72,000 is paid on January 1). g. Dividends of 130,000, declared on June 30, will be paid on July 15. h. Old equipment will be sold for 25,200 on July 4. i. On July 13, new equipment will be purchased for 173,000. j. The company maintains a minimum cash balance of 20,000. k. The cash balance on July 1 is 27,000. Required: Prepare a cash budget for July. Give a supporting schedule that details the cash collections from sales.
Alpha Company makes all its sales on account. The accounts receivable payment experience is as follows: Percent paid in the month of sale 35% Percent paid in the month after the sale 54% Percent paid in the second month after the sale 6% Alpha provided the following information on sales: May $150,000 June $125,000 July $136,000 August (expected) $142,000 What is the budgeted cash to be collected on account for the month of August? a.$150,000 b.$130,640 c.$45,000 d.$132,000 e.$154,600
Example 2: Cash Budget: Assuming the same details as in the purchases budget problem above, prepare a cash budget for the month of February given the following information: The company pays for 50% of all purchases in the month of purchase and 50% in the following month. Purchases for the month of January were $208,000. All sales are on account. The Company has historically collected 40% in the month of sale and 55% in the following month. Five percent of all credit sales are normally uncollectible. The cash balance on February 1 was $20,000. The Company borrowed $50,000 on February 2 from the bank and paid interest of $500 to the bank in February. Out-of-pocket selling and administrative costs of $15,000 were paid in February. Also, furniture costing $5,000 was purchased with cash. No other transactions affecting cash occurred in February.
Rivers Company purchases merchandise on account. In general, Rivers pays 50 percent in the month of purchase and 50 percent in the following month. All payments in the month of purchase qualify for a 2 percent cash discount. First quarter budgeted purchases are: January February March $90,000 80,000 96,000 A. What are the total cash disbursements expected in February? $ B. What are the total cash disbursements expected in March? C. Now suppose that there is no cash discount for purchases made in the month of purchase. What are the total cash disbursements expected in February and in March? February cash disbursements March cash disbursements
The PDQ Company makes collections on credit sales according to the following schedule: 10% in month of sale 85% in month following sale 5% uncollectible The following sales have been budgeted: Sales $100,000 $120,000 $110,000 Month April............ May. June. Cash collections in May would be: Numeric Response
2 Papst Company is preparing its cash budget for the month of May. The following information is available concerning its accounts receivable (based on sales made to customers on open account): $155, 000 $195, 000 $270, 000 Actual credit sales for March Actual credit sales for April Estimated credit sales for May Estimated collections in the month of sale 25% Estimated collections in the first month after the month of sale 60% Estimated collections in the second month after the month of sale 10% 5% Estimated provision for bad debts (made in the month of sale) The firm writes off all uncollectible accounts at the end of the second month after the month of sale. Required: Determine for Papst Company for the month of May: 1. The estimated cash receipts from accounts receivable collections. 2. The gross amount of accounts receivable at the end of the month (after appropriate write-off of uncollectible accounts). 3. The net amount of accounts receivable at the end of the month. 4.…
Schedule of Cash Collections on Accounts Receivable and Cash Budget Roybal Inc. sells all of its product on account. Roybal has the following accounts receivable payment experience: Percent paid in the month of sale 20 Percent paid in the month after the sale 55 Percent paid in the second month after the sale 23 To encourage payment in the month of sale, Roybal gives a 2% cash discount. Roybal's anticipated sales for the next few months are as follows: April $237,500 May 310,000 June 325,000 July 300,000 August 375,000 Required: 1. Prepare a schedule of cash receipts for July. Be sure to enter percentages as whole numbers. Roybal Inc.Schedule of Cash ReceiptsFor July Payments on account: From May credit sales: $fill in the blank da1540f3fff5feb_1 × fill in the blank da1540f3fff5feb_2 % $fill in the blank da1540f3fff5feb_3 From June credit sales: $fill in the blank da1540f3fff5feb_4 × fill…
Schedule of Cash Collections on Accounts Receivable and Cash Budget Roybal Inc. sells all of its product on account. Roybal has the following accounts receivable payment experience: Percent paid in the month of sale 20 Percent paid in the month after the sale 55 Percent paid in the second month after the sale 23 To encourage payment in the month of sale, Roybal gives a 2% cash discount. Roybal's anticipated sales for the next few months are as follows: April $266,000 May 347,200 June 364,000 July 336,000 August 420,000 Required: 1. Prepare a schedule of cash receipts for July. Be sure to enter percentages as whole numbers. Roybal Inc.Schedule of Cash ReceiptsFor July Payments on account: From May credit sales: $ × % $ From June credit sales: $ × % From July credit sales: $ × % Less: July cash discount $ × % Cash…