During the last week of March, Siro Stereo's owner approaches the bank for a $125,000 loan to be made on April 1 and repaid on June 30 with annual interest of 10%, for an interest cost of $3,125. The owner plans to increase the store's inventory by $100,000 in April and needs the loan to pay for inventory acquisitions. The bank's loan officer needs more information about Siro Stereo's ability to repay the loan and asks the owner to forecast the store's June 30 cash position. On April 1, Siro Stereo is expected to have a $12,000 cash balance, $121,500 of accounts receivable, and $90,000 of accounts payable. Its budgeted sales, merchandise purchases, and various cash disbursements for the next three months follows: April May June Sales 350,000 500,000 550,000 Mdse purchases Other cash disbursements: Payroll 250,000 200,000 190,000 22,500 30,000 37,500 Rent 1,2,000 12,000 12,000 Other cash expenses 9,000 13,500 16,500 125,000 Repayment of bank loan Interest on bank loan 3,125 The budgeted April merchandise purchases include the inventory increase. All sales are on account. Company experience is that 10% of credit sales are collected in the month of sale, 60% in the month following the sale, 25% in the second month, 3% in third, and the remainder is uncollectible. All merchandise is purchased on credit: 80% of the balance is paid in the month following a purchase and the remaining 20% is paid in the second month.
During the last week of March, Siro Stereo's owner approaches the bank for a $125,000 loan to be made on April 1 and repaid on June 30 with annual interest of 10%, for an interest cost of $3,125. The owner plans to increase the store's inventory by $100,000 in April and needs the loan to pay for inventory acquisitions. The bank's loan officer needs more information about Siro Stereo's ability to repay the loan and asks the owner to forecast the store's June 30 cash position. On April 1, Siro Stereo is expected to have a $12,000 cash balance, $121,500 of accounts receivable, and $90,000 of accounts payable. Its budgeted sales, merchandise purchases, and various cash disbursements for the next three months follows: April May June Sales 350,000 500,000 550,000 Mdse purchases Other cash disbursements: Payroll 250,000 200,000 190,000 22,500 30,000 37,500 Rent 1,2,000 12,000 12,000 Other cash expenses 9,000 13,500 16,500 125,000 Repayment of bank loan Interest on bank loan 3,125 The budgeted April merchandise purchases include the inventory increase. All sales are on account. Company experience is that 10% of credit sales are collected in the month of sale, 60% in the month following the sale, 25% in the second month, 3% in third, and the remainder is uncollectible. All merchandise is purchased on credit: 80% of the balance is paid in the month following a purchase and the remaining 20% is paid in the second month.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter17: Advanced Issues In Revenue Recognition
Section: Chapter Questions
Problem 11RE
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
Transcribed Image Text:D.
G.
H.
K.
3 During the last week of March, Siro Stereo's owner approaches the bank for a $125,000 loan to
4 be made on April 1 and repaid on June 30 with annual interest of 10%, for an interest cost of
5 $3,125. The owner plans to increase the store's inventory by $100,000 in April and needs the
6 loan to pay for inventory acquisitions. The bank's loan officer needs more information about
7 Siro Stereo's ability to repay the loan and asks the owner to forecast the store's June 30 cash
8 position. On April 1, Siro Stereo is expected to have a $12,000 cash balance, $121,500 of
9 accounts receivable, and $90,000 of accounts payable. Its budgeted sales, merchandise
10 purchases, and various cash disbursements for the next three months follows:
11
June
April
350,000
12
May
13 Sales
500,000
550,000
14 Mdse purchases
15 Other cash disbursements:
Рayroll
Rent
250,000
200,000
190,000
16
22,500
30,000
37,500
17
12,000
12,000
12,000
18
Other cash expenses
9,000
13,500
16,500
125,000
19 Repayment of bank loan
20 Interest on bank loan
3,125
21
22 The budgeted April merchandise purchases include the inventory increase. All sales are on
23 account. Company experience is that 10% of credit sales are collected in the month of sale, 60%
24 in the month following the sale, 25% in the second month, 3% in third, and the remainder is
25 uncollectible.
26
27 All merchandise is purchased on credit: 80% of the balance is paid in the month following a
28 purchase and the remaining 20% is paid in the second month.
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Transcribed Image Text:Of Payments, and Cash Budget
A
29
H.
J
K
30 1. Prepare a schedule of cash collections for April, May, and June. (Collections of the
31 Accounts Receivable from previous months are as follows: April- 81,000; May –
32 33,750, June - 4,050- remember to include in your schedule of cash collections).
33
34
35
Siro Stereo
36
Schedule of Cash Collections
37
38
April
May
June
39 Prior monts (A/R)
40
41 April
42
43
44
45 Мay
46
47
48 June
49
50 Total Cash Collections
51
52
53
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Vertical Analysis Ratio Analysis High Low What-if Analysis
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