Kat Ltd.'s September balance sheet contains the following information: Cash Accounts receivable. Allowance for doubtful accounts Merchandise inventory $ 37,500 (dr) 126,000 (dr) 2,800 (cr) 26,250 (dr) Management has designated $37,500 as the firm's minimum monthly cash balance. Other information about the firm and its operations is as follows: a. Sales revenues of $350,000, $420,000, and $312,500 are expected for October, November, and December, respectively. All goods are sold on account. b. The collection pattern for accounts receivable is 60% in the month of sale, 39% in the month following the month of sale, and 1% uncollectible, which is set up as an allowance. c. Cost of goods sold is 60% of sales revenues. d. Management's target ending balance of merchandise inventory is 10% of the current month's budgeted cost of goods sold. e. All accounts payable for inventory are paid in the month of purchase. f. Other monthly expenses are $49,250, which includes $3,500 of depreciation and $2,000 of bad debt expense. g. In the event of a shortfall, the company borrows money. In contrast, in the event of excess cash, the company invests in short-term investments. Borrowings and investments are assumed to be made at the end of a month in increments of $6,250. h. Interest on borrowings is 10% per year, payable every quarter, on the accumulated amount of the loan; similarly, interest earned on investments is 8% per year on the accumulated investments and is received every quarter. Investments can be matured and the principal amount redeemed in June or December of a year. Required: 1. Prepare a merchandise purchases budget for October and November. Total needs Kat Ltd. Merchandise Purchases Budget October November December
Kat Ltd.'s September balance sheet contains the following information: Cash Accounts receivable. Allowance for doubtful accounts Merchandise inventory $ 37,500 (dr) 126,000 (dr) 2,800 (cr) 26,250 (dr) Management has designated $37,500 as the firm's minimum monthly cash balance. Other information about the firm and its operations is as follows: a. Sales revenues of $350,000, $420,000, and $312,500 are expected for October, November, and December, respectively. All goods are sold on account. b. The collection pattern for accounts receivable is 60% in the month of sale, 39% in the month following the month of sale, and 1% uncollectible, which is set up as an allowance. c. Cost of goods sold is 60% of sales revenues. d. Management's target ending balance of merchandise inventory is 10% of the current month's budgeted cost of goods sold. e. All accounts payable for inventory are paid in the month of purchase. f. Other monthly expenses are $49,250, which includes $3,500 of depreciation and $2,000 of bad debt expense. g. In the event of a shortfall, the company borrows money. In contrast, in the event of excess cash, the company invests in short-term investments. Borrowings and investments are assumed to be made at the end of a month in increments of $6,250. h. Interest on borrowings is 10% per year, payable every quarter, on the accumulated amount of the loan; similarly, interest earned on investments is 8% per year on the accumulated investments and is received every quarter. Investments can be matured and the principal amount redeemed in June or December of a year. Required: 1. Prepare a merchandise purchases budget for October and November. Total needs Kat Ltd. Merchandise Purchases Budget October November December
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Kat Ltd.'s September balance sheet contains the following information:
Cash
Accounts receivable.
Allowance for doubtful accounts
Merchandise inventory
$ 37,500 (dr)
126,000 (dr)
2,800 (cr)
26,250 (dr)
Management has designated $37,500 as the firm's minimum monthly cash balance. Other information about the firm and its operations
is as follows:
a. Sales revenues of $350,000, $420,000, and $312,500 are expected for October, November, and December, respectively. All goods
are sold on account.
b. The collection pattern for accounts receivable is 60% in the month of sale, 39% in the month following the month of sale, and 1%
uncollectible, which is set up as an allowance.
c. Cost of goods sold is 60% of sales revenues.
d. Management's target ending balance of merchandise inventory is 10% of the current month's budgeted cost of goods sold.
e. All accounts payable for inventory are paid in the month of purchase.
f. Other monthly expenses are $49,250, which includes $3,500 of depreciation and $2,000 of bad debt expense.
g. In the event of a shortfall, the company borrows money. In contrast, in the event of excess cash, the company invests in short-term
investments. Borrowings and investments are assumed to be made at the end of a month in increments of $6,250.
h. Interest on borrowings is 0% per year, payable every quarter, on the accumulated amount of the loan; similarly, interest earned on
investments is 8% per year on the accumulated investments and is received every quarter. Investments can be matured and the
principal amount redeemed in June or December of a year.
Required:
1. Prepare a merchandise purchases budget for October and November.
Total needs
Kat Ltd.
Merchandise Purchases Budget
October November December
Transcribed Image Text:Mc
Graw
Hill
2. Prepare the cash budgets for October and November, including the effects of financing (borrowing or investing). Interest is earned
or paid quarterly. (Any "Repayments" and "Interest" should be indicated by a minus sign. Leave no cells blank be certain to enter
"0" wherever required.)
Total cash available
Deduct: Disbursements:
Total disbursements
Excess (deficiency) of cash
Financing:
Investments
Borrowings
Repayments
Interest
Total financing
Type here to search
Kat Ltd.
Cash Budget
O
October
Ri
November
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 5 images
Follow-up Questions
Read through expert solutions to related follow-up questions below.
Follow-up Question
How did you get 109200 and why not use the 126000
Solution
by Bartleby ExpertKnowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education