Concept explainers
Learning Goal 4
P4-12 Cash budget: Advanced The actual sales and purchases for Xenocore Inc. for September and October 2019, along with its
Wages and salaries amount to 20% of the preceding month’s sales. Rent of $20,000 per month must be paid. Interest payments of $10,000 are due in January and April. A principal payment of $30,000 is also due in April. The firm expects to pay cash dividends of $20,000 in January and April. Taxes of $80,000 are due in April. The firm also intends to make a $25,000 cash purchase of fixed assets in December.
- a. Assuming that the firm has a cash balance of $22,000 at the beginning of November, determine the end-of- month cash balances for each month, November through April.
- b. Assuming that the firm wishes to maintain a $15,000 minimum cash balance, determine the required total financing or excess cash balance for each month, November through April.
- c. If the firm were requesting a line of credit to cover needed financing for the period November to April, how large would this line have to be? Explain your answer.
Want to see the full answer?
Check out a sample textbook solutionChapter 4 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
- ICE TASK 4 – Budgeting Techniques The University of Africa requires all second-year engineering students to have their own laptop computers to do practical work and tasks. During the last quarter of 2022, a private company, Laptops for Students Proprietary Limited (“LFS”) was established to supply laptops according to the specifications set by the university, at affordable prices. At that time, a loan of R800 000 was granted to LFS and the funds were deposited into the bank account. Prior to the receipt of the loan amount no cash transactions occurred. The following additional information is available for LFS: According to estimates, 200 of the 400 second year engineering students will buy their laptops from LFS. There are two types of laptops which will be supplied, namely Exceptional at a selling price of R10 000 and Superior at a selling price of R8 000. Since the Exceptional laptop has a more powerful hard drive, it is expected that 60% of the 200 students will prefer to…arrow_forwardQuestion 4 Part I Advent used their historic collection percentages to budget for sales revenue for the first quarter of 2020as follows: January $100,000 February $175,000 March $250,000The company anticipates that approximately 80% of sales each month will be on credit. The historic percentages on collection are: 50% in the month of sale 40% in the month following the sale 10% two months following the sale Required: Prepare a monthly cash collections/receipts budget for the first quarter of 2020.arrow_forwardONLY ANSWER QUESTION (B) the task of preparing the cash budget for the business for the quarter ending September 30, 2022. Your data collection has yielded the following:i) Extracts from the sales and purchases budgets are as follows:Month CashSales SalesOn Account CashPurchases PurchasesOn AccountMay $75,000 $480,000 $390,000June $135,000 $600,000 $36,000 $360,000July $86,800 $720,000 $61,700 $450,000August $105,600 $640,000 $68,800 $400,000September $112,500 $800,000 $77,250 $500,000ii) An analysis of the records shows that trade…arrow_forward
- QUESTION 1You are required to prepare a cash budget for the third quarter of 2020 for STS Corporation.Month Total sales(RM)March 170,000April 100,000May 140,000June 180,000July 200,000AugustSeptemberOctober220,000195,000180,000i) The company makes 10 percent cash sales, and the balance are collected as follows; 60percent is collected one month after sales, 30 percent is collected two months after sales,and 10 percent is collected three months after sales.ii) Purchase of raw materials is 50 percent of sales and are made one month prior to sales.Payment are made equally in the two months after the purchases.iii) Wages and salaries amounting to 10 percent of the last month’s sales. The company fixedmonthly expenses are RM3,000 for rent, RM2,000 for utilities, RM10,000 for depreciation,and RM1,500 for insurance.iv) A quarterly dividend of RM50,000 will be paid at the end of each quarter.v) The company plans to pay RM70,500 in cash for a new machinery installed in August.vi) Ending cash…arrow_forwardtask 1 Prepare the following budgets for the year 2021: - a. Sales budget. Show total sales by quarter and in total for the year. d. Direct labour budget. task 2 Based Jaka’s experience, fifty percent (50%) of sales are paid in cash. Of the sales on account, seventy percent (70%) are collected in the quarter of sale; the remaining thirty percent (30%) are collected in the quarter following the sale. Total sales for the fourth quarter of 2020 totaled RM2,000,000. Required: Refer to the sales budget prepared in Task 1. Construct a cash receipts budget including an accounts receivable aging schedule for Jaka Sdn Bhd for each quarter of year 2021.arrow_forwardtask 1 Prepare the following budgets for the year 2021: - a. Sales budget. Show total sales by quarter and in total for the year. b. Production budget. Show total production unit by quarter and in total for the year. c. Direct material usage and purchase budget. d. Direct labour budget. task 2 Based Jaka’s experience, fifty percent (50%) of sales are paid in cash. Of the sales on account, seventy percent (70%) are collected in the quarter of sale; the remaining thirty percent (30%) are collected in the quarter following the sale. Total sales for the fourth quarter of 2020 totaled RM2,000,000. Required: Refer to the sales budget prepared in Task 1. Construct a cash receipts budget including an accounts receivable aging schedule for Jaka Sdn Bhd for each quarter of year 2021.arrow_forward
- Student question Garden Sales, Incorporated, sells garden supplies. Management is planning its cash needs for the second quarter. The company usually has to borrow money during this quarter to support peak sales of lawn care equipment, which occur during May. The following information has been assembled to assist in preparing a cash budget for the quarter: Budgeted monthly absorption costing income statements for April–July are: April May June July Sales $ 730,000 $ 910,000 $ 610,000 $ 520,000 Cost of goods sold 511,000 637,000 427,000 364,000 Gross margin 219,000 273,000 183,000 156,000 Selling and administrative expenses: Selling expense 91,000 110,000 72,000 52,000 Administrative expense* 50,500 68,800 44,600 49,000 Total selling and administrative expenses 141,500 178,800 116,600 101,000 Net operating income $ 77,500 $ 94,200 $ 66,400 $ 55,000 *Includes $33,000 of depreciation each month. Sales are 20% for cash and 80% on account. Sales…arrow_forwardQUESTION 3: Based on the following assumptions and policies ; a) Prepare the budget for Collectables from Sales! b) Prepare the budget for Purchases! c) Prepare the budget of Cash Payment for Purchases! d) Set the company’s Cash Budget for 2021 BOARD Policies & Assumptions - Company’s projected sales for the three months as followings: Sales Forecast for 2021 January 2021 200.000 USD February 2021 220.000 USD March 2021 240.000 USD - All Sales are credited: %40 of sales are collected as in form of cash. %30 of sales are credited for 1 month and %30 of it for the next month. Rule: 40;30;30 - Accounts Receivables by quarter ending 31/12/2020 amounted to 120.000 USD a) 30.000 USD of Account Receivables belong to November Sales ( 11/2020) b) 90.000 USD of Account Receivables belong to December Sales ( 12/2020) - All purchases are credited: %50 of purchases are paid in advance and %50 of purchases are debited - Projected Inventories by the…arrow_forwardQuestion 3 The Plantd’ Company’s budgeted sales for the first quarter of 2020 are as follows: N$ January 400 000 February 320 000 March 480 000 Total 1 200 000 Credit sales are normally collected as follows: Percent (%) In the month of sale 50 The month following the sale 30 The second month following the month of the sale 20 Total…arrow_forward
- Question 9 The Hothi Company prepares monthly cash budgets. Relevant data from operating budgets for 2023 are as follows: January February Sales $ 350,000 $ 400,000 Direct materials purchases 120,000 110,000 Selling and administrative expenses 220,000 267,000 Cash balances: The Hothi Company expects its cash balance on January 1, 2023, to be $50,000. It wants to maintain a cash balance of $40,000 by using its line of credit (ignore calculation and repayments of interest). Cash receipts: All sales are on account. The company expects collections to be 50% in the month of sale, 40% in the first month following the sale, and 10% in the second month following the sale. Credit sales: November 2022, $200,000; December 2022, $280,000 Cash disbursements: It pays 30% of direct materials purchases in cash in the month of…arrow_forwardPelican Merchandising & More is a family-owned store. The business is now approaching the end of the year and is in the process of identifying its cash needs for the first quarter of the new year. You are the management accountant of the entity and have been tasked to prepare the cash budget for the business for the quarter ending March 31, 2022.(i) Extracts from the sales and purchases budgets are as follows: Month2021 - 2022 CashSales SalesOnAccount CashPurchases PurchasesOnAccount November 2021 $138,100 $480,000 $345,000 December 2021 $156,500 $600,000 $25,800 $380,000 January 2022 $170,975 $650,000 $44,625 $400,000 February 2022 $135,740 $700,000 $30,400 $480,000 March 2022 $226,420 $800,000 $55,100 $540,000 (ii) An analysis of the records shows that trade receivables (accounts receivable) are settledaccording to the following credit pattern, in accordance with the credit terms 4/30, n90:55% in the month of sale35% in the first month following the…arrow_forwardPelican Merchandising & More is a family-owned store. The business is now approaching the end of the year and is in the process of identifying its cash needs for the first quarter of the new year. You are the management accountant of the entity and have been tasked to prepare the cash budget for the business for the quarter ending March 31, 2022.(i) Extracts from the sales and purchases budgets are as follows: Month2021 - 2022 CashSales SalesOnAccount CashPurchases PurchasesOnAccount November 2021 $138,100 $480,000 $345,000 December 2021 $156,500 $600,000 $25,800 $380,000 January 2022 $170,975 $650,000 $44,625 $400,000 February 2022 $135,740 $700,000 $30,400 $480,000 March 2022 $226,420 $800,000 $55,100 $540,000 (ii) An analysis of the records shows that trade receivables (accounts receivable) are settledaccording to the following credit pattern, in accordance with the credit terms 4/30, n90:55% in the month of sale35% in the first month following the…arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning