ACCTG 102 Lecture 16: ACCTG_102_-_LE_16

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rosebutterfly172

21 Aug 2020

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Excess (deficiency) of available cash over cash disbursements. If below minimum cash balance the company wants to maintain will have to borrow. In quarters where there is excess, show repayment and interest. Useful to prepare a schedule of collections from customers. Has to make assumptions based on historical experiences of how collections occur. 60% are collected in quarter sold and 40% next quarter. Also helpful to prepare a schedule of planned payments for dm. A cash budget contributes to more effective cash management. It will show you when additional financing is necessary before needed and will know when there may be excess. Budgeted b/s is a projection of financial position at end of budget period. B/s previous year and budgets for current year. Budgeting in non-manufacturing companies merchandising; very important to merchandising operation. Sales is starting point, major differences, with manufacturing is no production budget. Also does not use the manufacturing budgets (dm,

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Forest Outfitters is a retailer that is preparing its budget forthe upcoming fiscal year. Management has prepared the followingsummary of its budgeted cash flows:

	1stQuarter	2ndQuarter	3rdQuarter	4thQuarter
Total cashreceipts	$ 413,000	$ 696,000	$ 413,000	$ 498,000
Total cashdisbursements	$ 520,000	$ 409,000	$ 421,000	$ 467,000

The company's beginning cash balance for the upcoming fiscalyear will be $64,600. The company requires a minimum cash balanceof $30,700 and may borrow any amount needed from a local bank at aquarterly interest rate of 1.8%. The company may borrow any amountat the beginning of any quarter and may repay its loans, or anypart of its loans, at the end of any quarter. Interest payments aredue on any principal at the time it is repaid.

Required:

Complete the company's cash budget for the upcoming fiscal year.(Input all amounts as positive values except cashdeficiency, repayments, and interest, which should be indicated bya minus sign. Leave no cells blank - be certain to enter "0"wherever required. Do not round intermediate calculations. Roundyour answers to the nearest dollar amount. Omit the "$" sign inyour response.)

Forest Outfitters Cash Budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Cash balance,beginning	$	$	$	$	$
Total cashreceipts

Total cashavailable
Less total cashdisbursements

Excess (deficiency)of cash available over disbursements

Financing:
Borrowings (atbeginning)
Repayments (atending)
Interest

Total financing

Cash balance,ending	$	$	$	$	$

ultramarinebear391

ABC Company, an office supplies specialty store, prepares its master budget on a quarterly basis.

The following data have been assembled to assist in preparing the master budget for the first quarter.

As of December 31 (the end of the prior quarter), the company's general ledger showed the following account balances:

Buildings and equipment (net)

Actual sales for December and budgeted sales for the next four months are as follows:

Sales are collected as follows:

25%

collected in cash at the time of the sale

75%

on credit and collected in the month following sale

The accounts receivable at December 31 are a result of December credit sales.

The company's gross margin as a percent of sales is

40%

In other words, cost of goods sold is 60% of sales.

Monthly expenses are budgeted as follows:

Depreciation, including depreciation on new assets acquired during the quarter,

will be

$42,000

for the quarter.

All selling and administrative expenses, except depreciation, are paid in cash in the month they are incurred.

f. Each month's ending inventory should equal

20%

of the following month's cost of goods sold

g. Inventory purchases are paid for as follows:

50%

in the month of the purchase

with the remaining balance paid in the following month.

h. During February, the company will purchase a new copy machine for

$2,100

cash.

During March, the company will purchase other equipment for

$76,000

cash.

Cash dividends paid in January will be

$35,000

Management wants to maintain a current cash balance of

$20,000

The company has an agreement with the local bank that allows the company to

borrow in increments of $1,000 at the beginning of the month.

The monthly interest rate on the loan is

For simplicity, assume that the interest is not compounded.

The company would, as far as it is able, repay the loan plus any accumulated interest at the end of the quarter.

Required: Using the data above, complete the following statements and schedules for the first quarter using the formats given below.

To receive full credit, all amounts below must be entered as formulas or cell references, except for the financing section of the cash budget.

Submissions using formulas or cell references for the financing section may receive up to 3 points extra credit,

dependent upon the degree to which the formulas can be used for any and all possible scenarios. (Hint: IF statements.)

Schedule of expected cash collections

Total cash collections

Total cash collections =

$1,055,000

2a.

Merchandise purchases budget

Budgeted cost of goods sold

Desired ending inventory

Schedule of expected cash disbursements for merchandise purchases

Total cash disbursements

March purchases

for purchases =

Total cash disbursements for purchases

Beginning cash balance

Selling & admin. expenses

Equipment purchases

Cash dividends

Total cash disbursements

Excess (deficiency) of cash

Financing:

Borrowing

Repayment of principal

Mar. 31 cash balance =

$37,650

Prepare an absorption costing income statement for the quarter ended March 31 in the space below.

check figure:

Net income =

$55,350

Prepare a balance sheet as of March 31 in the space below.

Mary and Kay, Inc., a distributor of cosmetics throughoutFlorida, is in the process of assembling a cash budget for thefirst quarter of 20x1. The following information has been extractedfrom the companyâs accounting records:

All sales are on account. Sixty percent of customer accounts arecollected in the month of sale; 30 percent are collected in thefollowing month. Uncollectibles amounting to 10 percent of salesare anticipated, and management believes that only 20 percent ofthe accounts outstanding on December 31, 20x0, will be recoveredand that the recovery will be in January 20x1.

Sixty percent of the merchandise purchases are paid for in themonth of purchase; the remaining 40 percent are paid for in themonth after acquisition.

The December 31, 20x0, balance sheet disclosed the followingselected figures: cash, $65,000; accounts receivable, $230,000; andaccounts payable, $79,000.

Mary and Kay, Inc. maintains a $65,000 minimum cash balance atall times. Financing is available (and retired) in $1,000 multiplesat an 9 percent interest rate, with borrowings taking place at thebeginning of the month and repayments occurring at the end of themonth. Interest is paid at the time of repaying principal andcomputed on the portion of principal repaid at that time.

Additional data:

	jan.	Feb.	march
sales revenue	580,000	670,000	685,000
Merchandise purchases	400,000	430,000	550,000
Cash operating costs	106,000	85,000	148,000
Proceeds from sale of equipment			28,000

QUESTION 1 : Prepare a schedule that discloses thefirmâs total cash collections for January through March using thechart below.

	january	february	march
collection of accounts receivable
collection of january sales
collection of february sales
collection of march sales
sale of equipment
total cash collections

QUESTION 2: Prepare a schedule that discloses the firmâstotal cash disbursements for January through March.

	January	February	March
Payment of accounts payable
payment of january purchases
payment of february purchases
payment of march purchases
cash operating costs
total cash disbursements

QUESTION 3: Prepare a schedule that summarizes thefirmâs financing cash flows for January through March.

	january	February	March
beginning cash balance
total receipts
subtotal
LESS: total disbursements
Cash Excess (deficiency) before financing
Financing:
Borrowing to maintain 65,000 balance
loan principal repaid
loan interest paid
Ending Cash Balance

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ACCTG 102 Lecture 16: ACCTG_102_-_LE_16

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