Flounder, Inc. has budgeted sales revenues as follows: Credit sales Cash sales Total sales June June $139,000 98,000 $237,000 $383,000 $ 295,000 July August July $129,000 $300,000 222,000 102,000 254,000 Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on account with 50% is paid in the month of purchase and 50% paid in the month following purchase. Budgeted inventory purchases are as follows: August $ 95,000 200,000 Other cash disbursements budgeted: (a) selling and administrative expenses of $51,000 each month, (b) dividends of $105,000 will be paid in July, and (c) purchase of equipment in August for $34,000 cash. The company's policy is to maintain a minimum cash balance of $50,000 at the end of each month. The company borrows money from the bank at 6% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $50,000. Assume that borrowed money in this case is for one month.

Flounder, Inc. has budgeted sales revenues as follows: Credit sales Cash sales Total sales June June $139,000 98,000 $237,000 $383,000 $ 295,000 July August July $129,000 $300,000 222,000 102,000 254,000 Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on account with 50% is paid in the month of purchase and 50% paid in the month following purchase. Budgeted inventory purchases are as follows: August $ 95,000 200,000 Other cash disbursements budgeted: (a) selling and administrative expenses of $51,000 each month, (b) dividends of $105,000 will be paid in July, and (c) purchase of equipment in August for $34,000 cash. The company's policy is to maintain a minimum cash balance of $50,000 at the end of each month. The company borrows money from the bank at 6% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $50,000. Assume that borrowed money in this case is for one month.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 5P

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A companys sales for the coming months are as follows: About 20 percent of sales are cash sales, and the remainder are credit sales. The company finds that typically 10 percent of a months credit sales are paid in the month of sale, 70 percent are paid the next month, and 15 percent are paid in the second month after sale. Expected cash receipts in July are budgeted at what amount? a. 114,520 b. 143,150 c. 145,720 d. 156,000
Shalimar Company manufactures and sells industrial products. For next year, Shalimar has budgeted the follow sales: In Shalimars experience, 10 percent of sales are paid in cash. Of the sales on account, 65 percent are collected in the quarter of sale, 25 percent are collected in the quarter following the sale, and 7 percent are collected in the second quarter after the sale. The remaining 3 percent are never collected. Total sales for the third quarter of the current year are 4,900,000 and for the fourth quarter of the current year are 6,850,000. Required: 1. Calculate cash sales and credit sales expected in the last two quarters of the current year, and in each quarter of next year. 2. Construct a cash receipts budget for Shalimar Company for each quarter of the next year, showing the cash sales and the cash collections from credit sales. 3. What if the recession led Shalimars top management to assume that in the next year 10 percent of credit sales would never be collected? The expected payment percentages in the quarter of sale and the quarter after sale are assumed to be the same. How would that affect cash received in each quarter? Construct a revised cash budget using the new assumption.
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Budgeted income statement and supporting budgets for three months Bellaire Inc. gathered the following data for use in developing the budgets for the first quarter (January, February, March) of its fiscal year: Estimated sales at 125 per unit: Estimated finished goods inventories: Work in process inventories are estimated to be insignificant (zero). Estimated direct materials inventories: Manufacturing costs: Selling expenses: Instructions Prepare the following budgets using one column for each month and a total column for the first quarter, as shown for the sales budget: Prepare a sales budget for March. Prepare a production budget for March. Prepare a direct materials purchases budget for March. Prepare a direct labor cost budget for March. Prepare a factory overhead cost budget for March. Prepare a cost of goods sold budget for March. Prepare a selling and administrative expenses budget for March. Prepare a budgeted income statement with budgeted operating income for March.
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