Computing budgeted cash payments for purchases
Exercise 20-5 Computing budgeted cash payments for purchases L.O. P1
Powerdyne Company’s cost of goods sold is consistently 60% of sales. The company plans to carry ending merchandise inventory for each month equal to 40% of the next month’s budgeted cost of good sold. All merchandise is purchased on credit, and 50% of the purchases made during a month is paid for in that month. Another 35% is paid for during the first month after purchase, and the remaining 15% is paid for during the second month after purchase. Expected sales are: August (actual), $150,000; September (actual), $350,000; October (estimated), $200,000; November (estimated), $300,000.
Cash payments for purchases
Exercise 20-6 Computing budgeted purchases and costs of goods sold L.O. P1
Sand Dollar Company purchases all merchandise on credit. It recently budgeted the following month-end accounts payable balances and merchandise inventory balances. Cash payments on accounts payable during each month are expected to be: May, $1,300,000; June, $1,450,000; July, $1,350,000; and August, $1,400,000.
Payable Merchandise Inventory
May 31 $ 120,000 $ 250,000
June 30 170,000 400,000
July 31 200,000 300,000
August 31 160,000 330,000
- Compute the budgeted amounts of merchandise purchases for June, July, and August.(Omit the “$” sign in your response.)
June July August
Budgeted merchandise purchases $
- Compute the budgeted amounts of cost of goods sold for June, July, and August.(Omit the “$” sign in your response.)
June July August
Budgeted cost of goods sold $
Budgeted merchandise purchases
Budgeted cost of goods sold
Exercise 20-16 Cash budget L.O. P1
Kool-Ray is preparing its master budget for the quarter ended September 30. Budgeted sales and cash payments for merchandise for the next three months follow:
July August September
Budgeted sales $ 64,000 $ 80,000 $ 48,000
Budgeted cash payments for merchandise 40,400 33,600 34,400
Sales are 20% cash and 80% on credit. All credit sales are collected in the month following the sale. The June 30 balance sheet includes balances of $12,000 in cash; $45,000 in accounts receivable; $4,500 in accounts payable; and a $2,000 balance in loans payable. A minimum cash balance of $12,000 is required. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 1% per month based on the beginning of the month loan balance and is paid at each month-end. If an excess balance of cash exists, loans are repaid at the end of the month. Operating expenses are paid in the month incurred and consist of sales commissions (10% of sales), office salaries ($4,000 per month), and rent ($6,500 per month).
(1) Prepare a cash receipts budget for July, August, and September. (Input all amounts as positive values. Omit the “$” sign in your response.)
(2) Prepare a cash budget for each of the months of July, August, and September.(Input all amounts as positive values. Round your answers to the nearest dollar amount. Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)
Problem 20-5A: Preparation of a complete master budget L.O. C2, P1, P2
[The following information applies to the questions displayed below.]
Near the end of 2011, the management of Simid Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2011.
To prepare a master budget for January, February, and March of 2012, management gathers the following information.
- Simid Sports’ single product is purchased for $30 per unit and resold for $55 per unit. The expected inventory level of 2,500 units on December 31, 2011, is more than management’s desired level for 2012, which is 20% of the next month’s expected sales (in units). Expected sales are: January, 3,500 units; February, 4,500 units; March, 5,500 units; and April, 5,000 units.
- Cash sales and credit sales represent 25% and 75%, respectively, of total sales. Of the credit sales, 60% is collected in the first month after the month of sale and 40% in the second month after the month of sale. For the December 31, 2011, accounts receivable balance, $62,500 is collected in January and the remaining $200,000 is collected in February.
- Merchandise purchases are paid for as follows: 20% in the first month after the month of purchase and 80% in the second month after the month of purchase. For the December 31, 2011, accounts payable balance, $40,000 is paid in January and the remaining $140,000 is paid in February.
- Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $30,000 per year.
- General and administrative salaries are $72,000 per year. Maintenance expense equals $1,000 per month and is paid in cash.
- Equipment reported in the December 31, 2011, balance sheet was purchased in January 2011. It is being depreciated over eight years under the straight-line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter: January, $18,000; February, $48,000; and March, $14,400. This equipment will be depreciated under the straight-line method over eight years with no salvage value. A full month’s depreciation is taken for the month in which equipment is purchased.
- The company plans to acquire land at the end of March at a cost of $75,000, which will be paid with cash on the last day of the month.
- Simid Sports has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and interest is paid at each month-end based on the beginning balance. Partial or full payments on these loans can be made on the last day of the month. The company has agreed to maintain a minimum ending cash balance of $12,500 in each month.
- The income tax rate for the company is 40%. Income taxes on the first quarter’s income will not be paid until April 15.
4.Problem 20-5A Part 1
- Monthly sales budgets.(Omit the “$” sign in your response.)
- Problem 20-5A Part 2
- Monthly merchandise purchases budgets.(Units to be deducted should be indicated with a minus sign. Omit the “$” & “%” signs in your response.)
6.Problem 20-5A Part 3
- Monthly selling expense budgets.(Omit the “$” & “%” signs in your response.)
7.Problem 20-5A Part 4
- Monthly general and administrative expense budgets.(Do not round your intermediate calculations. Round your final answers to the nearest whole dollar. Omit the “$” sign in your response.)
Depreciation expense calculations
Problem 20-5A Part 5
- Monthly capital expenditures budgets.(Leave no cells blank – be certain to enter “0” wherever required. Input all amounts as positive values. Omit the “$” sign in your response.)
Problem 20-5A Part 6
- Monthly cash budgets.(Leave no cells blank – be certain to enter “0” wherever required. Input all amounts as positive values except negative preliminary cash balance and repayment of loan to bank which should be indicated by a minus sign. Omit the “$” sign in your response.)
10.Problem 20-5A Part
11.Problem 20-5A Part 8
- Budgeted balance sheet as of March 31, 2012.(Input all amounts as positive values. Be sure to list the assets in order of their liquidity. Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)