Elswick Products, Inc., is a merchandising company that sells binders, paper, and other school supplies. The company is planning its cash needs for the third quarter. In the past, Janus Products has had to borrow money during the third quarter to support peak sales of back-to-school materials, which occur during August. The following information has been assembled to assist in preparing a cash budget for the quarter: 1. Budgeted monthly absorption costing income statements for July-October are as follows:- July August September October £40,000 £70,000 Sales £50,000 £45,000 Cost of goods sold 24,000 42,000 30,000 27,000 Gross margin 16,000 28.000 20,000 18,000 Selling and administrative expenses: Selling expense 7,200 11,700 8,500 7,300 Administrative expense* 5,600 7,200 6,100 5,900 14.600 13,200 Total selling and administrative expenses Net operating income 12,800 18,900 £ 3,200 £ 9,100 £ 5,400 £4,800 *Includes £2,000 depreciation each month. 2. Sales are 20% for cash and 80% on credit. 3. Credit sales are collected over three months with 10% collected in the month of sale, 70% in the month following sale, and 20% in the second month following sale. May sales totalled £30,000, and June sales totalled £36,000. 4. Inventory purchases are paid for within 15 days. Therefore, 50% of a month's inventory purchases are paid for in the month of purchase. The remaining 50% is paid in the following month. Accounts payable for inventory purchases on June 30 total £11,700. 5. The company maintains its ending inventory levels at 75% of the cost of the merchandise to be sold in the following month. The merchandise inventory on June 30 is £18,000. 6. Land costing £4,500 will be purchased in July. Dividends of £1,000 will be declared and paid in September. 7.
Elswick Products, Inc., is a merchandising company that sells binders, paper, and other school supplies. The company is planning its cash needs for the third quarter. In the past, Janus Products has had to borrow money during the third quarter to support peak sales of back-to-school materials, which occur during August. The following information has been assembled to assist in preparing a cash budget for the quarter: 1. Budgeted monthly absorption costing income statements for July-October are as follows:- July August September October £40,000 £70,000 Sales £50,000 £45,000 Cost of goods sold 24,000 42,000 30,000 27,000 Gross margin 16,000 28.000 20,000 18,000 Selling and administrative expenses: Selling expense 7,200 11,700 8,500 7,300 Administrative expense* 5,600 7,200 6,100 5,900 14.600 13,200 Total selling and administrative expenses Net operating income 12,800 18,900 £ 3,200 £ 9,100 £ 5,400 £4,800 *Includes £2,000 depreciation each month. 2. Sales are 20% for cash and 80% on credit. 3. Credit sales are collected over three months with 10% collected in the month of sale, 70% in the month following sale, and 20% in the second month following sale. May sales totalled £30,000, and June sales totalled £36,000. 4. Inventory purchases are paid for within 15 days. Therefore, 50% of a month's inventory purchases are paid for in the month of purchase. The remaining 50% is paid in the following month. Accounts payable for inventory purchases on June 30 total £11,700. 5. The company maintains its ending inventory levels at 75% of the cost of the merchandise to be sold in the following month. The merchandise inventory on June 30 is £18,000. 6. Land costing £4,500 will be purchased in July. Dividends of £1,000 will be declared and paid in September. 7.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter8: Budgeting
Section: Chapter Questions
Problem 1E: At the beginning of the school year, Craig Kovar decided to prepare a cash budget for the months of...
Related questions
Question
Please show your workings(how to caculate these answers) in a) ,b), and c).
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 5 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,