Question 1 - On July 1, MTC Wholesalers had a cash balance of $175,000 and accounts payable of $99,000. Actual sales for May and June, and budgeted sales for July, August, September, and October are:
Month Actual Sales
Month Budgeted Sales
May $150,000
July $ 90,000
June 160,000
August 80,000
September 100,000
October 120,000
All sales are on credit with 75 percent collected during the month of sale, 20 percent collected during the next month, and 5 percent collected during the second month following the month of sale. Cost of goods sold averages 70 percent of sales revenue. Ending inventory is one-half of the next month's predicted cost of sales. The other half of the merchandise is acquired during the month of sale. All purchases are paid for in the month after purchase. Operating costs are estimated at $28,000 each month and are paid during the month incurred.
Required: Prepare purchases and cash budgets for July, August, and September.
Question 2 - Production and Purchases Budgets
At the beginning of October, Comfy Cushions had 1,600 cushions and 10,500 pounds of raw materials on hand. Budgeted sales for the next three months are:
Month Sales
October 8,000 cushions
November 10,000 cushions
December 13,000 cushions
Comfy Cushions wants to have sufficient raw materials on hand at the end of each month to meet 25 percent of the following month's production requirements and sufficient cushions on hand at the end of each month to meet 20 percent of the following month's budgeted sales. Five pounds of raw materials, at a standard cost of $0.90 per pound, are required to produce each cushion.
Required
a. Make a production budget for October and November.
b. Make a purchases budget in units and dollars for October.
Question 3 - Cash Disbursement
Timber Company is in the process of preparing its budget for next year. Cost of goods sold has been estimated at 70 percent of sales. Lumber purchases and payments are to be made during the month preceding the month of sale. Wages are estimated at 15 percent of sales and are paid during the month of sale. Other operating costs amounting to 10 percent of sales are to be paid in the month following the month of sale. Additionally, a monthly lease payment of $14,000 is paid for computer services. Sales revenue is forecast as follows
Month Sales Revenue
February $170,000
March 210,000
April 220,000
May 260,000
June 240,000
July 280,000
Required: Make a schedule of cash disbursements for April, May, and June.
Question 4 - Purchases Budget in Units and Dollars
Budgeted sales of Wirtz Music Shop for the first six months of 2017 are as follows:
Month Unit Sales Month Unit Sales
January 155,000
April 240,000
February 185,000
May 205,000
March 225,000
June 265,000
Beginning inventory for 2017 is 35,000 units. The budgeted inventory at the end of a month is 40 percent of units to be sold the following month. Purchase price per unit is $5.
Make a purchases budget in units and dollars for each month, January through May.
Question 5 - Cash Budget
Patrick's Retail Company is planning a cash budget for the next three months. Estimated sales revenue is as follows:
Month Sales Revenue Month Sales Revenue
January $ 350,000
March $ 250,000
February 300,000
April 200,000
All sales are on credit; 60 percent is collected during the month of sale, and 40 percent is collected during the next month. Cost of goods sold is 80 percent of sales. Payments for merchandise sold are made in the month following the month of sale. Operating expenses total $52,000 per month and are paid during the month incurred. The cash balance on February 1 is estimated to be $35,000.
Prepare monthly cash budgets for February, March, and April.
Question 6 - The Williams Supply Company sells for $40 one product that it purchases for $25. Budgeted sales in total dollars for next year are $1,400,000. The sales information needed for preparing the July budget follows:
Month Sales Revenue
May $ 34,000
June 48,000
July 56,000
August 64,000
Account balances at July 1 include these:
Cash $ 24,000
Merchandise inventory 17,500
Accounts receivable (sales) 25,760
Accounts payable (purchases) 16,250
The company pays for one-half of its purchases in the month of purchase and the remainder in the following month. End-of-month inventory must be 50 percent of the budgeted sales in units for the next month. A 2 percent cash discount on sales is allowed if payment is made during the month of sale. Experience indicates that 50 percent of the billings will be collected during the month of sale, 40 percent in the following month, 8 percent in the second following month, and 2 percent will be uncollectible. Total budgeted selling and administrative expenses (excluding bad debts) for the fiscal year are estimated at $210,000 , of which one-half is fixed expense (inclusive of a $21,000 annual depreciation charge). Fixed expenses are incurred evenly during the year. The other selling and administrative expenses vary with sales. Expenses are paid during the month incurred. (Round your answers to the nearest whole number.)
(a) Make a schedule of estimated cash collections for July.
(b) Make a schedule of estimated July cash payments for purchases. For this, perform your calculation using units rounding up to the nearest whole unit. Then convert to dollars for your answer.
(c) Create schedules of July selling and administrative expenses, separately identifying those requiring cash disbursements.
(d) Make a cash budget in summary form for July.
Question 7 - Developing a Master Budget for a Merchandising Organization
Dils Brother Department Store prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for 2017.
Dils Brother Department Store Balance Sheet March 31, 2017
Assets
Liabilities and Stockholders' Equity
Cash $ 4,000
Accounts payable $31,000
Accounts receivable 31,000
Dividends payable 15,000
Inventory 36,000
Rent payable 3,000
Prepaid Insurance 3,000
Stockholders' equity 50,000
Fixtures 25,000
Total assets $99,000
Total liabilities and equity $99,000
Actual and forecasted sales for selected months in 2017 are as follows:
Month Sales Revenue
January $ 70,000
February 60,000
March 50,000
April 60,000
May 70,000
June 80,000
July 100,000
August 90,000
Monthly operating expenses are as follows:
Wages and salaries $ 27,000
Depreciation 100
Utilities 1,500
Rent 3,000
Cash dividends of $15,000 are declared during the third month of each quarter and are paid during the first month of the following quarter. Operating expenses, except insurance, rent, and depreciation are paid as incurred. Rent is paid during the following month. The prepaid insurance is for five more months. Cost of goods sold is equal to 50 percent of sales. Ending inventories are sufficient for 120 percent of the next month's cost of sales. Purchases during any given month are paid in full during the following month. All sales are on account, with 50 percent collected during the month of sale, 40 percent during the next month, and 10 percent during the month thereafter. Money can be borrowed and repaid in multiples of $1,000 at an interest rate of 12 percent per year. The company desires a minimum cash balance of $4,000 on the first of each month. At the time the principal is repaid, interest is paid on the portion of principal that is repaid. All borrowing is at the beginning of the month, and all repayment is at the end of the month. Money is never repaid at the end of the month it is borrowed.
(a) Make a purchases budget for each month of the second quarter ending June 30, 2017.
(b) Make a cash receipts schedule for each month of the second quarter ending June 30, 2017. Do not include borrowings.
(c) Make a cash disbursements schedule for each month of the second quarter ending June 30, 2017. Do not include repayments of borrowings.
(d) Make a cash budget for each month of the second quarter ending June 30, 2017. Include budgeted borrowings and repayments.
(e) Make an income statement for each month of the second quarter ending June 30, 2017.
(f) Make a budgeted balance sheet as of June 30, 2017.