Khloe Company imports gift items from overseas and sells them to gift shops and department stores throughout the United States. Khloe Company provided the following information: a. The October 31 balance in the cash account is $53,817. b. All sales are on account. Sales in September were $950,000 and in October were $1,240,000. c. November sales are expected to be $2,145,000. d. In Khloe’s experience, 70 percent of sales are collected in the month of sale and 28 percent are collected in the month following sale. The remaining credit sales are uncollectible. e. Khloe purchases all merchandise on account. Purchases in September were $750,000 and in October were $980,000. November purchases are expected to be $2,000,000 as Khloe prepares for the Christmas buying season. Fifteen percent of purchases are paid in the month of purchase, while the remainder is paid in the month following the purchase month. f. Khloe Company has nine employees who are paid a total of $48,000 per month. Due to timing issues, about 90 percent of total wages are paid in the month earned and the remaining 10 percent are paid in the following month. g. Rent for office and warehouse space is $12,300 paid monthly in cash. h. Utilities average $6,100 per month and are paid in cash. i. In November, Khloe expects to pay employment taxes of $6,625. j. Since Khloe imports product from overseas, customs duty and shipping to the central location of 30 percent of current monthly purchase cost must be paid in the month of purchase. k. Other cash expenses for November are expected to be $41,500. Required: 1. Prepare a cash budget for Khloe Company for the month of November. 2. What if Khloe faced a customs duty and shipping percentage of 35 percent? How would that affect the November cash budget?

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Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
BuyFind

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

Solutions

Chapter
Section
Chapter 8, Problem 12CE
Textbook Problem

Khloe Company imports gift items from overseas and sells them to gift shops and department stores throughout the United States. Khloe Company provided the following information:

  1. a. The October 31 balance in the cash account is $53,817.
  2. b. All sales are on account. Sales in September were $950,000 and in October were $1,240,000.
  3. c. November sales are expected to be $2,145,000.
  4. d. In Khloe’s experience, 70 percent of sales are collected in the month of sale and 28 percent are collected in the month following sale. The remaining credit sales are uncollectible.
  5. e. Khloe purchases all merchandise on account. Purchases in September were $750,000 and in October were $980,000. November purchases are expected to be $2,000,000 as Khloe prepares for the Christmas buying season. Fifteen percent of purchases are paid in the month of purchase, while the remainder is paid in the month following the purchase month.
  6. f. Khloe Company has nine employees who are paid a total of $48,000 per month. Due to timing issues, about 90 percent of total wages are paid in the month earned and the remaining 10 percent are paid in the following month.
  7. g. Rent for office and warehouse space is $12,300 paid monthly in cash.
  8. h. Utilities average $6,100 per month and are paid in cash.
  9. i. In November, Khloe expects to pay employment taxes of $6,625.
  10. j. Since Khloe imports product from overseas, customs duty and shipping to the central location of 30 percent of current monthly purchase cost must be paid in the month of purchase.
  11. k. Other cash expenses for November are expected to be $41,500.

Required:

  1. 1. Prepare a cash budget for Khloe Company for the month of November.
  2. 2. What if Khloe faced a customs duty and shipping percentage of 35 percent? How would that affect the November cash budget?

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Chapter 8 Solutions

Cornerstones of Cost Management (Cornerstones Series)
Ch. 8 - While many small firms do not put together a...Ch. 8 - Discuss the shortcomings of the traditional master...Ch. 8 - Define static budget. Give an example that shows...Ch. 8 - What are the two meanings of a flexible budget?...Ch. 8 - What are the steps involved in building an...Ch. 8 - FlashKick Company manufactures and sells soccer...Ch. 8 - Refer to Cornerstone Exercise 8.1, through...Ch. 8 - Refer to Cornerstone Exercise 8.2 for the...Ch. 8 - The School of Accounting (SOA) at State University...Ch. 8 - Johnston Company cleans and applies powder coat...Ch. 8 - Play-Disc makes Frisbee-type plastic discs. Each...Ch. 8 - Refer to Cornerstone Exercise 8.6. Required: 1....Ch. 8 - Timothy Donaghy has developed a unique formula for...Ch. 8 - Green Earth Landscaping Company provides monthly...Ch. 8 - Coral Seas Jewelry Company makes and sells costume...Ch. 8 - Shalimar Company manufactures and sells industrial...Ch. 8 - Khloe Company imports gift items from overseas and...Ch. 8 - Nashler Company has the following budgeted...Ch. 8 - Refer to Cornerstone Exercise 8.13. In March,...Ch. 8 - Palmgren Company produces consumer products. The...Ch. 8 - Berring Company produces two products: the deluxe...Ch. 8 - Crescent Company produces stuffed toy animals; one...Ch. 8 - Audio-2-Go, Inc., manufactures MP3 players. Models...Ch. 8 - Tiger Drug Store carries a variety of health and...Ch. 8 - Rosita Flores owns Rositas Mexican Restaurant in...Ch. 8 - Refer to Exercise 8.20. Rosita thinks that it may...Ch. 8 - Janet Wooster owns a retail store that sells new...Ch. 8 - Historically, Ragman Company has had no...Ch. 8 - Del Spencer is the owner and founder of Del...Ch. 8 - Refer to Exercise 8.24. Del Spencers purchases...Ch. 8 - Ingles Corporation is a manufacturer of tables...Ch. 8 - In an attempt to improve budgeting, the controller...Ch. 8 - Refer to Exercise 8.27. At the end of the year,...Ch. 8 - Olympus, Inc., manufactures three models of...Ch. 8 - Refer to Exercise 8.29. Suppose Gene determines...Ch. 8 - Trumbull Co. plans to produce 100,000 toy cars...Ch. 8 - Which of the following describes the order in...Ch. 8 - A companys controller is adjusting next years...Ch. 8 - A companys sales for the coming months are as...Ch. 8 - The budget that adjusts unit sales for beginning...Ch. 8 - Ponderosa, Inc., produces wiring harness...Ch. 8 - Bernard Creighton is the controller for Creighton...Ch. 8 - Greiner Company makes and sells high-quality glare...Ch. 8 - Friendly Freddies is an independently owned major...Ch. 8 - The controller for Muir Companys Salem plant is...Ch. 8 - Refer to Problem 8.40 for data. Required: 1. Run a...Ch. 8 - Norton Company, a manufacturer of infant furniture...

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