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In September 2013, the budget committee of Jason Company assembles the following data: 1. Expected Sales October $1,800,000 November 1,700,000 December 1,600,000 2. Cost of goods sold is expected to be 60% of sales. 3. Desired ending merchandise inventory is 20% of the next month’s cost of goods sold. 4. The beginning inventory at October 1 will be the desired amount. Instructions Prepare the budgeted income statement for October through gross profit on sales, including a cost of goods sold schedule. Ex. 184 (Cont.) · Burr pays 30% of merchandise purchases in the month purchased and 70% in the following month. · General operating expenses are budgeted to be $20,000 per month of which depreciation is $2,000 of this amount. Burr pays operating expenses in the month incurred. · Burr makes loan payments of $3,000 per month of which $400 is interest and the remainder is principal. Instructions Calculate Burr’s budgeted cash disbursements for August. Ex. 185 Casa Development, Inc. has budgeted sales revenues as follows: Budgeted Sales Revenues January $55,000 February 75,000 March 90,000 April 80,000 May 60,000 June 35,000 Past experience has indicated that 80% of sales each month are on credit and that collection of credit sales occurs as follows: 60% in the month of sale, 30% in the month following the sale, and 5% in the second month following the sale. The other 5% is uncollectible. Instructions Prepare a schedule which shows expected cash receipts from sales for the months of April, May, and June. Ex. 186 Cruises, Inc. has budgeted sales revenues as follows: June July August Credit sales $135,000 $125,000 $ 90,000 Cash sales 90,000 255,000 195,000 Total sales $225,000 $380,000 $285,000 Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Budgeted inventory purchases are: June $300,000 July 240,000 August 105,000 Other cash disbursements budgeted: (a) selling and administrative expenses of $48,000 each month, (b) dividends of $103,000 will be paid in July, and (c) purchase of equipment in August for $30,000 cash. Ex. 186 (Cont.) The company wishes to maintain a minimum cash balance of $50,000 at the end of each month. The company borrows money from the bank at 6% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $50,000. Assume that borrowed money in this case is for one month. Instructions Prepare a cash budget for the months of July and August. Prepare separate schedules for expected collections from customers and expected payments for purchases of inventory. Ex. 187 Clay Co.’s projected sales are as follows: August $400,000 September $450,000 October $550,000 Clay estimates that it will collect 30% in the month of sale, 50% in the month after the sale, and 18% in the second month following the sale. Two percent of all sales are estimated to be bad debts. Instructions How much are Clay Co.’s budgeted cash receipts for October? Ex. 188 The Sunstate Bank has asked Dell Printing Co. for a budgeted balance sheet for the year ended December 31, 2013. The following information is available: 1. The cash budget shows an expected cash balance of $75,000 at December 31, 2013. 2. The 2013 sales budget shows total annual sales of $800,000. All sales are made on account and accounts receivable at December 31, 2013 are expected to be 10% of annual sales. 3. The merchandise purchases budget shows budgeted cost of goods sold for 2013 of $600,000 and ending merchandise inventory of $95,000. 20% of the ending inventory is expected to have not yet been paid at December 31, 2013. 4. The December 31, 2012 balance sheet includes the following balances: Equipment $294,000, Accumulated Depreciation $122,000, Common Stock $270,000, and Retained Earnings $48,000. 5. The budgeted income statement for 2013 includes the following: depreciation on equipment $15,000, federal income taxes $21,000, and net income $49,000. The income taxes will not be paid until 2013. 6. In 2013, management does not expect to purchase additional equipment or to declare any dividends. It does expect to pay all operating expenses, other than depreciation, in cash. Ex. 188 (Cont.) Instructions Prepare an unclassified budgeted balance sheet at December 31, 2013. Ex. 189 The management of Ocean Industries estimates that credit sales for August, September, October, and November will be $540,000, $750,000, $840,000, and $480,000, respectively. Experience has shown that collections are made as follows: In month of sale 25% In first month after sale 60% In second month after sale 10% Instructions Determine the collections from customers in October and November. Show all computations. Ex. 190 The beginning cash balance is $20,000. Sales are forecasted at $700,000 of which 80% will be on credit. 70% of credit sales are expected to be collected in the year of sale. Cash expenditures for the year are forecasted at $500,000. Accounts receivable from previous accounting periods totaling $12,000 will be collected in the current year. The company is required to make a $20,000 loan payment and an annual interest payment on the last day of the year. The loan balance as of the beginning of the year is $120,000, and the annual interest rate is 10%. Instructions How much will be reported as ‘cash’ on the budgeted balance sheet? Ex. 191 Rudd Company has budgeted sales revenue as follows for the next 4 months: February $300,000 March 240,000 April 210,000 May 330,000 Past experience indicates that 80% of sales each month are on credit and that collection of credit sales occurs as follows: 60% in the month of sale, 35% in the month following the sale, and 3% in the second month following the sale. The other 2% is uncollectible. Ex. 191 (Cont.) Instructions Prepare a schedule which shows expected cash receipts from sales for the month of May. Ex. 192 Hagen Company’s budgeted sales and direct materials purchases are as follows. Budgeted Sales Budgeted D.M. Purchases January $300,000 $60,000 February 330,000 70,000 March 350,000 80,000 Hagen’s sales are 40% cash and 60% credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% in the second month following sale; 4% are uncollectible. Hagen’s purchases are 50% cash and 50% on account. Purchases on account are paid 40% in the month of purchase, and 60% in the month following purchase. Instructions (a) Prepare a schedule of expected collections from customers for March. (b) Prepare a schedule of expected payments for direct materials for March. ( Ex. 193 Minor Landscaping Company is preparing its budget for the first quarter of 2013. The next step in the budgeting process is to prepare a cash receipts schedule and a cash payments schedule. To that end the following information has been collected. Clients usually pay 60% of their fee in the month that service is provided, 30% the month after, and 10% the second month after receiving service. Actual service revenue for 2012 and expected service revenues for 2013 are: November 2012, $120,000; December 2012, $110,000; January 2013, $140,000; February 2013, $160,000; March 2013, $170,000. Purchases on landscaping supplies (direct materials) are paid 40% in the month of purchase and 60% the following month. Actual purchases for 2012 and expected purchases for 2013 are: December 2012, $21,000; January 2013, $20,000; February 2013, $22,000; March 2013, $27,000. Instructions (a) Prepare the following schedules for each month in the first quarter of 2013 and for the quarter in total: (1) Expected collections from clients. (2) Expected payments for landscaping supplies. Ex. 193 (Cont.) (b) Determine the following balances at March 31, 2013: (1) Accounts receivable. (2) Accounts payable. Ex. 194 In May 2013, the budget committee of Crater, Inc. assembles the following data in preparation of budgeted merchandise purchases for the month of June. 1. Expected sales: June $750,000, July $900,000. 2. Cost of goods sold is expected to be 80% of sales. 3. Desired ending merchandise inventory is 40% of the following (next) month’s cost of goods sold. 4. The beginning inventory at June 1 will be the desired amount. Instructions (a) Compute the budgeted merchandise purchases for June. (b) Prepare the budgeted income statement for June through gross profit. Ex. 195 In September 2013, the management of Rye Company assembles the following data in preparation of budgeted merchandise purchases for the months of October and November. 1. Expected Sales October $1,500,000 November 2,100,000 December 2,700,000 2. Cost of goods sold is expected to be 70% of sales. 3. Desired ending merchandise inventory is 20% of the next month’s cost of goods sold. 4. The beginning inventory at October 1 will be the desired amount. Instructions Compute the budgeted merchandise purchases for October and November. Use a columnar format with separate columns for each month.

In September 2013, the budget committee of Jason Company assembles the following data:

1. Expected Sales

October $1,800,000

November 1,700,000

December 1,600,000

2. Cost of goods sold is expected to be 60% of sales.

3. Desired ending merchandise inventory is 20% of the next month’s cost of goods sold.

4. The beginning inventory at October 1 will be the desired amount.

Instructions

Prepare the budgeted income statement for October through gross profit on sales, including a cost of goods sold schedule.

 

 

Ex. 184 (Cont.)

· Burr pays 30% of merchandise purchases in the month purchased and 70% in the following month.

· General operating expenses are budgeted to be $20,000 per month of which depreciation is $2,000 of this amount. Burr pays operating expenses in the month incurred.

· Burr makes loan payments of $3,000 per month of which $400 is interest and the remainder is principal.

Instructions

Calculate Burr’s budgeted cash disbursements for August.

 

Ex. 185

Casa Development, Inc. has budgeted sales revenues as follows:

Budgeted Sales Revenues

January $55,000

February 75,000

March 90,000

April 80,000

May 60,000

June 35,000

Past experience has indicated that 80% of sales each month are on credit and that collection of credit sales occurs as follows: 60% in the month of sale, 30% in the month following the sale, and 5% in the second month following the sale. The other 5% is uncollectible.

Instructions

Prepare a schedule which shows expected cash receipts from sales for the months of April, May, and June.

 

Ex. 186

Cruises, Inc. has budgeted sales revenues as follows:

June July August

Credit sales $135,000 $125,000 $ 90,000

Cash sales 90,000 255,000 195,000

Total sales $225,000 $380,000 $285,000

Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Budgeted inventory purchases are:

June $300,000

July 240,000

August 105,000

Other cash disbursements budgeted: (a) selling and administrative expenses of $48,000 each month, (b) dividends of $103,000 will be paid in July, and (c) purchase of equipment in August for $30,000 cash.

 

Ex. 186 (Cont.)

The company wishes to maintain a minimum cash balance of $50,000 at the end of each month. The company borrows money from the bank at 6% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $50,000. Assume that borrowed money in this case is for one month.

Instructions

Prepare a cash budget for the months of July and August. Prepare separate schedules for expected collections from customers and expected payments for purchases of inventory.

 

Ex. 187

Clay Co.’s projected sales are as follows:

August $400,000

September $450,000

October $550,000

Clay estimates that it will collect 30% in the month of sale, 50% in the month after the sale, and 18% in the second month following the sale. Two percent of all sales are estimated to be bad debts.

Instructions

How much are Clay Co.’s budgeted cash receipts for October?

 

Ex. 188

The Sunstate Bank has asked Dell Printing Co. for a budgeted balance sheet for the year ended December 31, 2013. The following information is available:

1. The cash budget shows an expected cash balance of $75,000 at December 31, 2013.

2. The 2013 sales budget shows total annual sales of $800,000. All sales are made on account and accounts receivable at December 31, 2013 are expected to be 10% of annual sales.

3. The merchandise purchases budget shows budgeted cost of goods sold for 2013 of $600,000 and ending merchandise inventory of $95,000. 20% of the ending inventory is expected to have not yet been paid at December 31, 2013.

4. The December 31, 2012 balance sheet includes the following balances: Equipment $294,000, Accumulated Depreciation $122,000, Common Stock $270,000, and Retained Earnings $48,000.

5. The budgeted income statement for 2013 includes the following: depreciation on equipment $15,000, federal income taxes $21,000, and net income $49,000. The income taxes will not be paid until 2013.

6. In 2013, management does not expect to purchase additional equipment or to declare any dividends. It does expect to pay all operating expenses, other than depreciation, in cash.

 

Ex. 188 (Cont.)

Instructions

Prepare an unclassified budgeted balance sheet at December 31, 2013.

 

Ex. 189

The management of Ocean Industries estimates that credit sales for August, September, October, and November will be $540,000, $750,000, $840,000, and $480,000, respectively. Experience has shown that collections are made as follows:

In month of sale 25%

In first month after sale 60%

In second month after sale 10%

Instructions

Determine the collections from customers in October and November. Show all computations.

 

Ex. 190

The beginning cash balance is $20,000. Sales are forecasted at $700,000 of which 80% will be on credit. 70% of credit sales are expected to be collected in the year of sale. Cash expenditures for the year are forecasted at $500,000. Accounts receivable from previous accounting periods totaling $12,000 will be collected in the current year. The company is required to make a $20,000 loan payment and an annual interest payment on the last day of the year. The loan balance as of the beginning of the year is $120,000, and the annual interest rate is 10%.

Instructions

How much will be reported as ‘cash’ on the budgeted balance sheet?

 

Ex. 191

Rudd Company has budgeted sales revenue as follows for the next 4 months:

February $300,000

March 240,000

April 210,000

May 330,000

Past experience indicates that 80% of sales each month are on credit and that collection of credit sales occurs as follows: 60% in the month of sale, 35% in the month following the sale, and 3% in the second month following the sale. The other 2% is uncollectible.

 

Ex. 191 (Cont.)

Instructions

Prepare a schedule which shows expected cash receipts from sales for the month of May.

 

Ex. 192

Hagen Company’s budgeted sales and direct materials purchases are as follows.

Budgeted Sales Budgeted D.M. Purchases

January $300,000 $60,000

February 330,000 70,000

March 350,000 80,000

Hagen’s sales are 40% cash and 60% credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% in the second month following sale; 4% are uncollectible. Hagen’s purchases are 50% cash and 50% on account. Purchases on account are paid 40% in the month of purchase, and 60% in the month following purchase.

Instructions

(a) Prepare a schedule of expected collections from customers for March.

(b) Prepare a schedule of expected payments for direct materials for March.

 

(

Ex. 193

Minor Landscaping Company is preparing its budget for the first quarter of 2013. The next step in the budgeting process is to prepare a cash receipts schedule and a cash payments schedule. To that end the following information has been collected.

Clients usually pay 60% of their fee in the month that service is provided, 30% the month after, and 10% the second month after receiving service.

Actual service revenue for 2012 and expected service revenues for 2013 are: November 2012, $120,000; December 2012, $110,000; January 2013, $140,000; February 2013, $160,000; March 2013, $170,000.

Purchases on landscaping supplies (direct materials) are paid 40% in the month of purchase and 60% the following month. Actual purchases for 2012 and expected purchases for 2013 are: December 2012, $21,000; January 2013, $20,000; February 2013, $22,000; March 2013, $27,000.

Instructions

(a) Prepare the following schedules for each month in the first quarter of 2013 and for the quarter in total:

(1) Expected collections from clients.

(2) Expected payments for landscaping supplies.

 

Ex. 193 (Cont.)

(b) Determine the following balances at March 31, 2013:

(1) Accounts receivable.

(2) Accounts payable.

 

Ex. 194

In May 2013, the budget committee of Crater, Inc. assembles the following data in preparation of budgeted merchandise purchases for the month of June.

1. Expected sales: June $750,000, July $900,000.

2. Cost of goods sold is expected to be 80% of sales.

3. Desired ending merchandise inventory is 40% of the following (next) month’s cost of goods sold.

4. The beginning inventory at June 1 will be the desired amount.

Instructions

(a) Compute the budgeted merchandise purchases for June.

(b) Prepare the budgeted income statement for June through gross profit.

 

Ex. 195

In September 2013, the management of Rye Company assembles the following data in preparation of budgeted merchandise purchases for the months of October and November.

1. Expected Sales

October $1,500,000

November 2,100,000

December 2,700,000

2. Cost of goods sold is expected to be 70% of sales.

3. Desired ending merchandise inventory is 20% of the next month’s cost of goods sold.

4. The beginning inventory at October 1 will be the desired amount.

Instructions

Compute the budgeted merchandise purchases for October and November. Use a columnar format with separate columns for each month.

 

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