MANAGERIAL ACCOUNTING W/CONNECT
15th Edition
ISBN: 9781259732454
Author: Garrison
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
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Chapter 8, Problem 25P
PROBLEM 8-25 Schedule of Expected Cash Collections;
Herbal Care Corp., a distributor of herb-based sunscreens, is ready to begin its third quarter, in which peak sales occur. The company has requested a $40,000, 90-day loan from its bank to help meet cash requirements during the quarter. Since Herbal Care has experienced difficulty in paying off its loans in the past, the loan officer at the bank has asked the company to prepare a cash budget for the quarter. In response to this request, the following data have been assembled:
a. On July 1, the beginning of the third quarter, the company will have a cash balance of $44,500.
b. Actual sales for the last two months and budgeted sales for the third quarter follow (all sales are on account):
| May (actual) | $250,000 |
| June (actual) | $300,000 |
| July (budgeted) | $400,000 |
| August (budgeted) | $600,000 |
| September (budgeted) | $320,000 |
Past experience shows that 25% of a month’s sales are collected in the month of sale, 70% in the month following sale, and 3% in the second month following sale. The remainder is uncollectible.
c. Budgeted merchandise purchases and budgeted expenses for the third quarter are given below:
| July | August | September | |
| Merchandise purchases | $240,000 | $350,000 | $175,000 |
| Salaries and wages | $45,000 | $50,000 | $40,000 |
| Advertising | $130,000 | $145,000 | $80,000 |
| Rent payments | $9,000 | $9,000 | $9,000 |
| $10,000 | $10,000 | $10,000 |
Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases on June 30, which will be paid during July, total $180,000.
d. Equipment costing $10,000 will be purchased for cash during July.
e. In preparing the cash budget, assume that the $40,000 loan will be made in July and repaid in September. Interest on the loan will total $1,200.
Required:
1. Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total.
2. Prepare a cash budget, by month and in total, for the third quarter.
3. If the company needs a minimum cash balance of $20,000 to start each month, can the loan be repaid as planned? Explain.
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Chapter 8 Solutions
MANAGERIAL ACCOUNTING W/CONNECT
Ch. 8 - Prob. 1QCh. 8 - Prob. 2QCh. 8 - Prob. 3QCh. 8 - 8-4 What is a master budget? Briefly describe its...Ch. 8 - 8—5 Why is the sales forecast the starting point...Ch. 8 - Prob. 6QCh. 8 - 8-7 Why is it a good idea to create a ‘"Budgeting...Ch. 8 - 8-8 What is a self-imposed budget? What are the...Ch. 8 - Prob. 9QCh. 8 - Prob. 10Q
Ch. 8 -
The Excel worksheet form that appears below is to...Ch. 8 - Prob. 2AECh. 8 - Prob. 1F15Ch. 8 - Prob. 2F15Ch. 8 - Prob. 3F15Ch. 8 - Prob. 4F15Ch. 8 - Morganton Company makes one product and it...Ch. 8 - Morganton Company makes one product and it...Ch. 8 - Morganton Company makes one product and it...Ch. 8 - Morganton Company makes one product and it...Ch. 8 - Morganton Company makes one product and it...Ch. 8 - Morganton Company makes one product and it...Ch. 8 - Prob. 11F15Ch. 8 - Prob. 12F15Ch. 8 - Prob. 13F15Ch. 8 - Prob. 14F15Ch. 8 - Prob. 15F15Ch. 8 - EXERCISE 8-1 Schedule of Expected Cash Collections...Ch. 8 - Prob. 2ECh. 8 - EXERCISE 8-3 Direct Materials Budget LOW Three...Ch. 8 -
EXERCISE 8-4 Direct Labor Budget...Ch. 8 -
EXERCISE 8-5 Manufacturing Overhead Budget...Ch. 8 -
...Ch. 8 -
The company's beginning cash balance for the...Ch. 8 - EXERCISE 8-8 Budgeted Income Statement LO8-9 Gig...Ch. 8 - EXERCISE 8-9 Budgeted Balance Sheet LO8-10 The...Ch. 8 -
EXERCISE 8-10 Production and Direct Materials...Ch. 8 - EXERCISE 8-11 Cash Budget Analysis LOB-8 A cash...Ch. 8 - Prob. 12ECh. 8 - Prob. 13ECh. 8 -
EXERCISE 8-14 Sales and Production Budgets LO8-2,...Ch. 8 - EXERCISE 8-15 Direct Labor and Manufacturing...Ch. 8 - EXERCISE 8-16 Direct Materials and Direct Labor...Ch. 8 - Prob. 17PCh. 8 - Prob. 18PCh. 8 - PROBLEM 8-19 Cash Budget: Income Statement:...Ch. 8 -
PROBLEM 8-20 Cash Budget; Income Statement;...Ch. 8 - Prob. 21PCh. 8 -
PROBLEM 8-22 Evaluating a Company’s Budget...Ch. 8 - PROBLEM 8—23 schedule or Expected cash...Ch. 8 - PROBLEM 8-24 Cash Budget with Supporting Schedules...Ch. 8 - PROBLEM 8-25 Schedule of Expected Cash...Ch. 8 - PROBLEM 8-26 Behavioral Aspects of Budgeting:...Ch. 8 - (
$
55,000
$ 55, 000
...Ch. 8 -
PROBLEM 8-28 Cash Budget with Supporting...Ch. 8 - PROBLEM 8-29 Completing a Master Budget LO8-2,...Ch. 8 - PROBLEM 8-30 Integration of the Sales, Production,...Ch. 8 - Prob. 31C
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