Janus Products, Inc., is a merchandising company that sells binders, paper, and other school supplies. The company is planning its cash needs for the third quarter. In the past, Janus Products has had to borrow money during the third quarter to support peak sales of back-to-school materials, which occur during August. The following information has been assembled to assist in preparing a cash budget for the quarter:
| a. |
Budgeted monthly absorption costing income statements for July-October are as follows: |
|
July |
August |
September |
October |
| Sales |
$ |
38,000 |
$ |
68,000 |
$ |
66,000 |
$ |
43,000 |
| Cost of goods sold |
|
22,000 |
|
40,000 |
|
30,000 |
|
25,000 |
|
|
|
|
|
|
|
|
|
| Gross margin |
|
16,000 |
|
28,000 |
|
36,000 |
|
18,000 |
|
|
|
|
|
|
|
|
|
| Selling and administrative expenses: |
|
|
|
|
|
|
|
|
| Selling expense |
|
6,400 |
|
10,600 |
|
8,700 |
|
8,200 |
| Administrative expense* |
|
3,400 |
|
6,400 |
|
6,800 |
|
6,200 |
|
|
|
|
|
|
|
|
|
| Total selling and administrative expenses |
|
9,800 |
|
17,000 |
|
15,500 |
|
14,400 |
|
|
|
|
|
|
|
|
|
| Net operating income |
$ |
6,200 |
$ |
11,000 |
$ |
20,500 |
$ |
3,600 |
|
|
|
|
|
|
|
|
|
|
| *Includes $1,600 depreciation each month. |
| b. |
Sales are 30% for cash and 70% on credit. |
| c. |
Credit sales are collected over a three-month period with 10% collected in the month of sale, 55% in the month following sale, and 35% in the second month following sale. May sales totaled $42,000, and June sales totaled $30,000.
|
| d. |
Inventory purchases are paid for within 15 days. Therefore, 50% of a month's inventory purchases are paid for in the month of purchase. The remaining 50% is paid in the following month. Accounts payable for inventory purchases at June 30 total $12,200.
|
| e. |
The company maintains its ending inventory levels at 80% of the cost of the merchandise to be sold in the following month. The merchandise inventory at June 30 is $17,600.
|
| f. |
Land costing $4,600 will be purchased in July. |
| g. |
Dividends of $1,700 will be declared and paid in September. |
| h. |
The cash balance on June 30 is $6,000; the company must maintain a cash balance of at least this amount at the end of each month.
|
| i. |
The company has an agreement with a local bank that allows it to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $40,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.
|
| Required: |
| 1. |
Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total. (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations.)
|
| Schedule of Expected Cash Collections |
|
July |
August |
September |
Quarter |
| Cash sales |
$ ? |
$? |
$? |
$? |
| Sales on account: |
|
|
|
|
| May |
$? |
$? |
$? |
$? |
| June |
$? |
$? |
$? |
$? |
| July |
$? |
$? |
$? |
$? |
| August |
$? |
$? |
$? |
$? |
| September |
$? |
$? |
$? |
$? |
|
|
|
|
|
| Total cash collections |
$? |
$? |
$? |
$? |
|
|
|
|
|
|
| 2. |
Prepare the following for merchandise inventory:
|
| a. |
A merchandise purchases budget for July, August, and September. (Input all amounts as positive values. Do not round intermediate calculations.)
|
| Merchandise Purchases Budget |
|
July |
August |
September |
| Budgeted cost of goods sold |
$? |
$? |
$? |
| Add: Ending inventory |
$? |
$? |
$? |
|
|
|
|
| Total needs |
$? |
$? |
$? |
| Deduct: Beginning inventory |
$? |
$? |
$? |
|
|
|
|
| Required inventory purchases |
$? |
$? |
$? |
|
|
|
|
|
| b. |
A schedule of expected cash disbursements for merchandise purchases for July, August, and September and for the quarter in total. (Leave no cells blank - be certain to enter "0" wherever required.)
|
| Schedule of Expected Cash Disbursements |
|
July |
August |
September |
Quarter |
| Accounts payable, June 30 |
$? |
$? |
$? |
$? |
| July purchases |
$? |
$? |
$? |
$? |
| August purchases |
$? |
$? |
$? |
$? |
| September purchases |
$? |
$? |
$? |
$? |
| |
|
|
|
|
| Total cash disbursements |
$? |
$? |
$? |
$? |
| |
|
|
|
|
|
| 3. |
Prepare a cash budget for July, August, and September and for the quarter in total. (Input all amounts as positive values except cash deficiency, repayments and interest which should be indicated by a minus sign. Total Financing should be indicated with a minus sign when the company is repaying amounts that were previously borrowed. Selling and Administrative expenses are paid in the month in which the expenses are incurred. Leave no cells blank - be certain to enter "0" wherever required.)
|
Janus Products, Inc.
Cash Budget
For the Quarter Ended September 30 |
|
July |
August |
September |
Quarter |
| Cash balance, beginning |
$? |
$? |
$? |
$? |
| Add collections from sales |
$? |
$? |
$? |
$? |
|
|
|
|
|
| Total cash available |
$? |
$? |
$? |
$? |
|
|
|
|
|
| Less disbursements: |
|
|
|
|
| For inventory purchases |
$? |
$? |
$? |
$? |
| For selling expenses |
$? |
$? |
$? |
$? |
| For administrative expenses |
$? |
$? |
$? |
$? |
| For land |
$? |
$? |
$? |
$? |
| For dividends |
$? |
$? |
$? |
$? |
|
|
|
|
|
| Total disbursements |
$? |
$? |
$? |
$? |
|
|
|
|
|
| Excess (deficiency) of cash available over disbursements |
$? |
$? |
$? |
$? |
|
|
|
|
|
| Financing: |
|
|
|
|
| Borrowings |
$? |
$? |
$? |
$? |
| Repayment |
$? |
$? |
$? |
$? |
| Interest |
$? |
$? |
$? |
$? |
|
|
|
|
|
| Total financing |
$? |
$? |
$? |
$? |
|
|
|
|
|
| Cash balance, ending |
$? |
$? |
$? |
$ ? |