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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 company’s 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 thefirm’s 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 firm’stotal 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 thefirm’s 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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Nelly Stracke
Nelly StrackeLv2
28 Sep 2019

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The submission is to be an Excel file.

All calculations are to be shown, including the use of Excelformulas where applicable

All requirements should be on one excel worksheet

All schedules should be properly formatted as demonstrated inyour text (including applicable dollar signs and subtotal/totalunderlines).

Company is trying to determine their cash needs for the firstquarter of 2015. The following information is available:

All sales are on account. 40% of customer accounts are collectedin the months of sale; 55% are collected in the month following thesale. Uncollectibles amounting to 5% of sales are anticipated, andmanagement believes that only 14% of the accounts outstanding onDecember 31, 2014, will be recovered and that the recovery will bein January 2015.

60% of the merchandise purchases are paid for in the month ofpurchase; the remaining 40% are paid for in the month afteracquisition.

The December 31, 2014 balance sheet disclosed the followingselected figures: cash $30,000, accounts receivable $50,000, andaccounts payable $23,000.

Regal Company maintains a $20,000 minimum cash balance at alltimes. Financing is available (and retired) in $1,000 multiples ata 6% per year 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:

January:

Sales Revenue: 120,000

Merchandise Purchases: 85,000

Cash Operating Costs: 24,000

Proceeds from Sale of Equipment: n/a

February:

Sales Revenue: 135,000

Merchandise Purchases: 93,000

Cash Operating Costs: 20,000

Proceeds from Sale of Equipment: n/a

March:

Sales Revenue: 160,000

Merchandise Purchases: 102,000

Cash Operating Costs: 35,000

Proceeds from Sale of Equipment: 6,500

Required:

1. Prepare a schedule of total cash collections for Januarythrough March.

2. Prepare a schedule of total cash disbursements for Januarythrough March.

3. Prepare a cash budget for January through March.

Johnson Corp is interested in purchasing some newmaterial-handling equipment right after the beginning of the newyear. They would like to finance the new equipment with cash andmarketable securities, but if necessary they can get a short-termloan from a local bank. You have been engaged to prepare a masterbudget for Johnson Corp for the first quarter of 20x1. Johnson Corpis a small, rapidly growing wholesaler of consumer electronicproducts. The company’s main product lines are small kitchenappliances and power tools. The marketing manager has recentlycompleted a sales forecast. She believes the company’s sales duringthe first quarter of 20x1 will increase by 10 percent each monthover the previous month’s sales. Then sales are expected to remainconstant for several months. Johnson Corp’s projected balance sheetas of December 31, 20x0 is as follows:

Cash: $ 70,000

Accounts receivable: 476,000

Marketable securities: 30,000

Inventory: 269,500

Buildings and equipment (net of accumulated depreciation):1,252,000

Total assets: $ 2,097,500

Accounts payable: $ 308,700

Bond interest payable: 25,000

Property taxes payable: 7,600

Bonds payable (10%; due in 20x6): 600,000

Common stock: 1,000,000

Retained earnings: 156,200

Total liabilities and stockholders' equity: $ 2,097,500

The controller is now preparing a budget for the first quarterof 20x1. In the process, the following information has beenaccumulated:

1) Projected sales for December 20x0 are $700,000. Credit salesare typically 80% of totals sales. Johnson Corp’s credit experienceindicates that 15% of credit sales are collected during the monthof sale, and the remainder are collected during the followingmonth.

2) Johnson Corp’s cost of goods sold generally runs at 70% ofsales. Inventory is purchased on account and 40% of each month’spurchases are paid during the month of purchase. The remainder ispaid during the following month. In order to have adequate stocksof inventory on hand, the company attempts to have inventory onhand at the end of each month equal to half of the next month’sprojected cost of goods sold.

3) The controller has estimated that Johnson Corp’s othermonthly expenses will be as follows: Sales salaries $ 40,000Advertising and promotion 35,000 Administrative salaries 37,000Depreciation 45,000 Interest on bonds 5,000 Property taxes 1,900 Inaddition, sales commissions run at the rate of 2 percent ofsales.

4) The company president has indicated that the company shouldinvest $225,000 in an automated inventory-handling system tocontrol the movement of inventory in the company’s warehouse justafter the new year begins. This equipment purchase will be financedprimarily from the company’s cash and marketable securities.However, the president believes the company needs to keep a minimumcash balance of $50,000. If necessary, the remainder of theequipment purchases will be financed using short-term credit from alocal bank. The minimum period for such a loan is three months. Thecurrent short-term interest rates are 10 percent per year and areexpected to remain at this rate through the time the equipment ispurchased. If a loan is necessary, the president has decided thatit should be paid off by the end of the first quarter if possible.If the entire loan cannot be paid off, the maximum amount should bepaid while maintaining the minimum cash balance.

5) Johnson Corp’s board of directors has indicated an intentionto declare and pay dividends of $100,000 on the last day of eachquarter.

6) The interest on any short-term borrowing will be paid whenthe loan is repaid. Interest on Johnson Corp’s bonds is paidsemiannually on January 31 and July 31 for the preceding sixmonthperiod.

7) Property taxes are paid semiannually on February 28 andAugust 31 for the preceding six-month period.

Required: Prepare Johnson Corp’s master budget for the firstquarter of 20x1 by completing the following schedules andstatements.

4) Cash disbursements budget:

20x1

January February March 1st Quarter

Inventory purchases: Cashpayments for purchases during the current month

Cash payments for purchasesduring the preceding month

Total cash payments for inventorypurchases

Other expenses:

Sales salaries

Advertising andpromotion

Administrative salaries Intereston bonds

Property taxes

Sales commissions

Total cash payments for otherexpenses

Total cashdisbursements

Johnson Corp is interested in purchasing some newmaterial-handling equipment right after the beginning of the newyear. They would like to finance the new equipment with cash andmarketable securities, but if necessary they can get a short-termloan from a local bank. You have been engaged to prepare a masterbudget for Johnson Corp for the first quarter of 20x1. Johnson Corpis a small, rapidly growing wholesaler of consumer electronicproducts. The company’s main product lines are small kitchenappliances and power tools. The marketing manager has recentlycompleted a sales forecast. She believes the company’s sales duringthe first quarter of 20x1 will increase by 10 percent each monthover the previous month’s sales. Then sales are expected to remainconstant for several months. Johnson Corp’s projected balance sheetas of December 31, 20x0 is as follows:

Cash: $ 70,000

Accounts receivable: 476,000

Marketable securities: 30,000

Inventory: 269,500

Buildings and equipment (net of accumulated depreciation):1,252,000

Total assets: $ 2,097,500

Accounts payable: $ 308,700

Bond interest payable: 25,000

Property taxes payable: 7,600

Bonds payable (10%; due in 20x6): 600,000

Common stock: 1,000,000

Retained earnings: 156,200

Total liabilities and stockholders' equity: $ 2,097,500

The controller is now preparing a budget for the first quarterof 20x1. In the process, the following information has beenaccumulated:

1) Projected sales for December 20x0 are $700,000. Credit salesare typically 80% of totals sales. Johnson Corp’s credit experienceindicates that 15% of credit sales are collected during the monthof sale, and the remainder are collected during the followingmonth.

2) Johnson Corp’s cost of goods sold generally runs at 70% ofsales. Inventory is purchased on account and 40% of each month’spurchases are paid during the month of purchase. The remainder ispaid during the following month. In order to have adequate stocksof inventory on hand, the company attempts to have inventory onhand at the end of each month equal to half of the next month’sprojected cost of goods sold.

3) The controller has estimated that Johnson Corp’s othermonthly expenses will be as follows: Sales salaries $ 40,000Advertising and promotion 35,000 Administrative salaries 37,000Depreciation 45,000 Interest on bonds 5,000 Property taxes 1,900 Inaddition, sales commissions run at the rate of 2 percent ofsales.

4) The company president has indicated that the company shouldinvest $225,000 in an automated inventory-handling system tocontrol the movement of inventory in the company’s warehouse justafter the new year begins. This equipment purchase will be financedprimarily from the company’s cash and marketable securities.However, the president believes the company needs to keep a minimumcash balance of $50,000. If necessary, the remainder of theequipment purchases will be financed using short-term credit from alocal bank. The minimum period for such a loan is three months. Thecurrent short-term interest rates are 10 percent per year and areexpected to remain at this rate through the time the equipment ispurchased. If a loan is necessary, the president has decided thatit should be paid off by the end of the first quarter if possible.If the entire loan cannot be paid off, the maximum amount should bepaid while maintaining the minimum cash balance.

5) Johnson Corp’s board of directors has indicated an intentionto declare and pay dividends of $100,000 on the last day of eachquarter.

6) The interest on any short-term borrowing will be paid whenthe loan is repaid. Interest on Johnson Corp’s bonds is paidsemiannually on January 31 and July 31 for the preceding sixmonthperiod.

7) Property taxes are paid semiannually on February 28 andAugust 31 for the preceding six-month period.

Required: Prepare Johnson Corp’s master budget for the firstquarter of 20x1 by completing the following schedules andstatements.

5) Complete the first three lines of the summary budget.Then do the analysis of short-termfinancing needs in requirement (6). Then finish requirement(5).

Summary cash budget:

20x1

January February March 1stQuarter

Cash receipts (sch 2)

Less: Cash disbursements (sch 4) Change in cashbalance during period due to operations

Sale of marketable securities(1/2/x1)

Proceeds from bank loan(1/2/x1)

Purchase of equipment

Repayment of bank loan(3/31/x1)

Interest on bank loan

Payment of dividends

Change in cash balance duringfirst quarter XXXXX XXXXX XXXXX

Cash balance, 1/1/x1 XXXXX XXXXXXXXXX

Cash balance, 3/31/x1 XXXXX XXXXXXXXXX

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