Francis and Company has planned a cash budget for the third quarter of 2004. Thecash balance on July 1, 2004 is expected to be an overdraft of $s82,000.Extracts from the sales and purchases budgets are as follows:BudgetedBudgetedMonthSalesPurchasesMayJuneJulyAugustSeptember$800,000$900,000$750,000$650,000$800,000$600,000$550,000$450,000$500,000All sales are on credit and an analysis of the records shows that debtors settleaccording to the following pattern, in accordance with the credit terms 5/30,i)n90:50% in the month of sale30% in the month following sale20% the following monthAll purchases are on credit and past experience shows that 80% are settled inthe month of purchase in order to take advantage of a 10% prompt settlementii)discount. The balance will be disbursed in the month after purchase.The credit terms of the suppliers - 10/30, n60.iii) Wages and salaries are expected to be $1,800,000 per annum and are paidmonthly.iv)Fixed operating expenses, which accrue evenly throughout the year, areestimated to be $2,400,000 per annum, (including depreciation on fixed assetsof $60,000 per month) and is settled monthly.v)Taxation of $80,000 has to be settled in August.vijThe company is expected to receive settlement on an insurance claim of$50,000 in September.vii) Interest on investment in other companies of $25,000 is expected in July 2004.viii) A short-term investment in JMMB Ltd. of $80,000 will be liquidated inSeptember 2004.ix)The business has made arrangements with their bankers for a loan of$250,000. The loan will be disbursed in two tranches:July 1, 2004November 1, 2004$150,000$100,000 Required:Prepare a schedule of expected cash collections for sales for each of the monthsJuly to September.Prepare a schedule of expected cash disbursements for purchases for thequarter to September 30, 2004.Prepare a cash budget, with a total column, for the quarter ending September30, 2004, showing the expected receipts and payments for each month.(a)(b)(c)

The question is based on the concept of Cost Accounting.

Francis and Company has planned a cash budget for the third quarter of 2004. The cash balance on July 1, 2004 is expected to be an overdraft of $32,000. Extracts from the sales and purchases budgets are as follows: Budgeted Sales Budgeted Purchases Month May June July |August September $800,000 $900,000 $750,000 $650,000 $800,000 $600,000 $550,000 $450,000 $500,000 All sales are on credit and an analysis of the records shows that debtors settle according to the following pattern, in accordance with the credit terms 5/30, n90: 50% in the month of sale 30% in the month following sale 20% the following month

Francis and Company has planned a cash budget for the third quarter of 2004. The cash balance on July 1, 2004 is expected to be an overdraft of $32,000. Extracts from the sales and purchases budgets are as follows: Budgeted Sales Budgeted Purchases Month May June July |August September $800,000 $900,000 $750,000 $650,000 $800,000 $600,000 $550,000 $450,000 $500,000 All sales are on credit and an analysis of the records shows that debtors settle according to the following pattern, in accordance with the credit terms 5/30, n90: 50% in the month of sale 30% in the month following sale 20% the following month

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 4P

See similar textbooks

Similar questions

Before the year began, the following static budget was developed for the estimated sales of 100,000. Sales are sluggish and management needs to revise its budget. Use this information to prepare a flexible budget for 80,000 and 90,000 units of sales.
The sales department of Macro Manufacturing Co. has forecast sales for its single product to be 20,000 units for June, with three-quarters of the sales expected in the East region and one-fourth in the West region. The budgeted selling price is 25 per unit. The desired ending inventory on June 30 is 2,000 units, and the expected beginning inventory on June 1 is 3,000 units. Prepare the following: a. A sales budget for June. b. A production budget for June.
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.
Carmichael Corporation is in the process of preparing next years budget. The pro forma income statement for the current year is as follows: Required: 1. What is the break-even sales revenue (rounded to the nearest dollar) for Carmichael Corporation for the current year? 2. For the coming year, the management of Carmichael Corporation anticipates an 8 percent increase in variable costs and a 60,000 increase in fixed expenses. What is the break-even point in dollars for next year? (CMA adapted)
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
Relevant data from the Poster Companys operating budgets are: Additional data: Capital assets were sold in January for $10,000 and $4,500 in May. Dividends of $4,500 were paid in February. The beginning cash balance was $60,359 and a required minimum cash balance is $59,000. Use this information to prepare a cash budget for the first two quarters of the year
Digital Solutions Inc. uses flexible budgets that are based on the following data: Prepare a flexible selling and administrative expenses budget for October for sales volumes of 500,000, 750,000, and 1,000,000.
Review the completed master budget and answer the following questions: Is Ranger Industries expecting to earn a profit during the next quarter? If so, how much? Does the company need to borrow cash during the quarter? Can it make any repayments? Explain. (Carefully review rows 74 through 80.)
Starburst Inc. has the following items and amounts as part of its master budget at the 10,000-unit level of sales and production: Determine the total dollar amounts for the above items that would appear in a flexible budget at the following volume levels, assuming that both levels are within the relevant range: a. 8,000-unit level of sales and production b. 12,000-unit level of sales and production (Hint: You must first determine the unit selling price and certain unit costs.)
Budgeted income statement and supporting budgets The budget director of Jupiter Helmets Inc., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for May: Prepare a cost of goods sold budget for May. Work in process at the beginning of May is estimated to be $4200. and work in process at the end of May is desired to be $3800.
Cash budget The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: The company expects to sell about 10% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month following the sale and the remainder the following month (second month following sale). Depreciation, insurance, and property tax expense represent 50,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in January, and the annual property taxes are paid in December. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month. Current assets as of September 1 include cash of 40,000, marketable securities of 75,000, and accounts receivable of 300,000 (60,000 from July sales and 240,000 from August sales). Sales on account for July and August were 200,000 and 240,000, respectively. Current liabilities as of September 1 include 40,000 of accounts payable incurred in August for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of 55,000 will be made in October. Bridgeports regular quarterly dividend of 25,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of 50,000. Instructions Prepare a monthly cash budget and supporting schedules for September, October, and November. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?
CASH BUDGETING Helen Bowers, owner of Helens Fashion Designs, is planning to request a line of credit from her bank. She has estimated the following sales forecasts for the firm for parts of 2019 and 2020: Estimates regarding payments obtained from the credit department are as follows: collected within the month of sale, 10%; collected the month following the sale, 75%; collected the second month following the sale, 15%. Payments for labor and raw materials are made the month after these services were provided. Here are the estimated costs of labor plus raw materials: General and administrative salaries are approximately 27,000 a month. Lease payments under long-term leases are 9,000 a month. Depreciation charges are 36,000 a month. Miscellaneous expenses are 2,700 a month. Income tax payments of 63,000 are due in September and December. A progress payment of 180,000 on a new design studio must be paid in October. Cash on hand on July 1 will be 132,000, and a minimum cash balance of 90,000 should be maintained throughout the cash budget period. a. Prepare a monthly cash budget for the last 6 months of 2019. b. Prepare monthly estimates of the required financing or excess fundsthat is, the amount of money Bowers will need to borrow or will have available to invest. c. Now suppose receipts from sales come in uniformly during the month (that is, cash receipts come in at the rate of 1/30 each day), but all outflows must be paid on the 5th. Will this affect the cash budget? That is, will the cash budget you prepared be valid under these assumptions? If not, what could be done to make a valid estimate of the peak financing requirements? No calculations are required, although if you prefer, you can use calculations to illustrate the effects. d. Bowers sales are seasonal, and her company produces on a seasonal basis, just ahead of sales. Without making any calculations, discuss how the companys current and debt ratios would vary during the year if all financial requirements were met with short-term bank loans. Could changes in these ratios affect the firms ability to obtain bank credit? Explain.