Problem 9-14 (45 minutes)
1. Schedule of expected cash collections:
Month
May
April
June
From accounts
receivable ..................... $141,000 $ 7,200
From April sales:
20% _ 200,000..............
40,000
75% _ 200,000..............
150,000
4% _ 200,000 ...............
$ 8,000
From May sales:
20% _ 300,000..............
60,000
75% _ 300,000..............
225,000
From June sales:
20% _ 250,000..............
50,000
Total cash collections ........ $181,000 $217,200 $283,000
Quarter
$148,200
40,000
150,000
8,000
60,000
225,000
50,000
$681,200
Problem 9-14 (continued)
2. Cash budget:
Cash balance,
beginning....................
Add receipts:
Collections from
customers ................
Total available ................
Less disbursements:
Merchandise
purchases.................
Payroll ........................
Lease payments...........
Advertising..................
Equipment purchases ...
Total disbursements........
Excess (deficiency) of
receipts over
disbursements .............
Financing:
Borrowings..................
Repayments ................
Interest ......................
Total financing ...............
Cash balance, ending
April
Month
May
June
Quarter
$ 26,000
$ 27,000
$ 20,200
$ 26,000
181,000
207,000
217,200
244,200
283,000
303,200
681,200
707,200
108,000
9,000
15,000
70,000
8,000
210,000
120,000
9,000
15,000
80,000
—
224,000
180,000
8,000
15,000
60,000
—
263,000
408,000
26,000
45,000
210,000
8,000
697,000
20,200
40,200
10,200
(3,000)
30,000
—
—
30,000
$ 27,000
—
—
—
(30,000)
—
(1,200)
—
(31,200)
$ 20,200 $ 9,000
30,000
(30,000)
(1,200)
(1,200)
$ 9,000
3. If the company needs a minimum cash balance of $20,000 to start each
month, the loan cannot be repaid in full by June 30. If the loan is repaid
in full, the cash balance will drop to only $9,000 on June 30, as shown
above. Some portion of the loan balance will have to be carried over to
July, at which time the cash inflow should be sufficient to complete
repayment.
Problem 9-16 (60 minutes)
1. The sales budget for the third quarter:
July
Aug.
Sept.
Quarter
Budgeted sales (pairs) ......
6,000
7,000
5,000
18,000
Selling price per pair .........
_ $50
_ $50
_ $50
_ $50
Total budgeted sales......... $300,000 $350,000 $250,000 $900,000
The schedule of expected cash collections from sales:
July
Aug.
Sept.
Quarter
Accounts receivable,
beginning balance.......... $130,000
$130,000
July sales:
$300,000 _ 40%, 50% ... 120,000 $150,000
270,000
August sales:
$350,000 _ 40%, 50% ...
140,000 $175,000 315,000
September sales:
$250,000 _ 40%............
100,000 100,000
Total cash collections ........ $250,000 $290,000 $275,000 $815,000
2. The production budget for July through October:
Budgeted sales (pairs) .......................
Add desired ending inventory .............
Total needs.......................................
Less beginning inventory....................
Required production (pairs) ................
July
Aug. Sept. Oct.
6,000 7,000 5,000 4,000
700
500
400
300
6,700 7,500 5,400 4,300
600
700
500
400
6,100 6,800 4,900 3,900
Problem 9-16 (continued)
3. The materials purchases budget for the third quarter:
Required production—pairs
(above).............................
Raw materials needs per
pair ..................................
Production needs (kgs.) ........
Add desired ending
inventory ..........................
Total needs..........................
Less beginning inventory.......
Raw materials to be
purchased .........................
Cost of raw materials to be
purchased at $2.50 per
kg. ...................................
July
Aug.
Sept.
Quarter
6,100
6,800
4,900
17,800
_ 2kgs.
12,200
_ 2kgs.
13,600
_ 2kgs.
9,800
_ 2kgs.
35,600
2,720
14,920
2,440
1,960
15,560
2,720
1,560 *
11,360
1,960
1,560
37,160
2,440
12,480
12,840
9,400
34,720
$31,200
$32,100
$23,500
$86,800
*3,900 pairs (October) _ 2 kgs. per pair= 7,800 kgs.;
7,800 kgs. _ 20% = 1,560 kgs.
The schedule of expected cash disbursements:
July
Aug.
Sept.
Quarter
Accounts payable, beginning
balance................................... $11,400
$11,400
July purchases:
$31,200 _ 60%, 40% ............... 18,720 $12,480
31,200
August purchases:
$32,100 _ 60%, 40% ...............
19,260 $12,840 32,100
September purchases:
$23,500 _ 60%........................
14,100 14,100
Total cash disbursements ............ $30,120 $31,740 $26,940 $88,800
Problem 9-19 (120 minutes)
1. Schedule of expected cash collections:
April
May
June
Total
Cash sales ............................... $14,000 $17,000 $18,000 $ 49,000
Credit sales.............................. 48,000 56,000 68,000 172,000
Total collections........................ $62,000 $73,000 $86,000 $221,000
2. a. Inventory purchases budget:
Budgeted cost of goods sold......
Add desired ending inventory* ..
Total needs..............................
Less beginning inventory...........
Required purchases ..................
April
May
June
Total
$42,000 $51,000 $54,000 $147,000
15,300 16,200
9,000
9,000
57,300 67,200 63,000 156,000
12,600 15,300 16,200
12,600
$44,700 $51,900 $46,800 $143,400
*
At April 30: $51,000 _ 30% = $15,300.
At June 30: $50,000 July sales _ 60% _ 30% = $9,000.
b. Schedule of cash disbursements for purchases:
April
May
June
Total
For March purchases ................ $18,300
$18,300
For April purchases................... 22,350 $22,350
44,700
For May purchases ...................
25,950 $25,950
51,900
For June purchases ..................
23,400
23,400
Total cash disbursements .......... $40,650 $48,300 $49,350 $138,300
Problem 9-19 (continued)
3. Schedule of cash disbursements for operating expenses:
April
May
June
Total
$ 7,500 $ 7,500 $ 7,500 $22,500
4,200
5,100
5,400 14,700
6,000
6,000
6,000 18,000
2,800
3,400
3,600
9,800
Salaries and wages.......................
Shipping......................................
Advertising ..................................
Other expenses............................
Total cash disbursements for
operating expenses.................... $20,500 $22,000 $22,500 $65,000
4. Cash budget:
April
May
Cash balance, beginning ............... $ 9,000 $ 8,350
Add cash collections ..................... 62,000 73,000
Total cash available.................... 71,000 81,350
Less disbursements:
For inventory purchases ............. 40,650 48,300
For operating expenses .............. 20,500 22,000
For equipment purchases ........... 11,500
3,000
For dividends ............................
0
0
Total disbursements...................... 72,650 73,300
Excess (deficiency) of cash............ (1,650) 8,050
Financing:
Borrowings ............................... 10,000
0
Repayments ..............................
0
0
Interest* ..................................
0
0
Total financing ............................. 10,000
0
Cash balance, ending.................... $ 8,350 $ 8,050
* $10,000 _ 12% _ 3/12 = $300.
June
Total
$ 8,050 $ 9,000
86,000 221,000
94,050 230,000
49,350 138,300
22,500 65,000
0 14,500
3,500
3,500
75,350 221,300
18,700
8,700
0 10,000
(10,000) (10,000)
(300)
(300)
(10,300)
(300)
$ 8,400 $ 8,400
Problem 9-19 (continued)
5. Income Statement:
NORDIC COMPANY
Income Statement
For the Quarter Ended June 30
Sales........................................................
Less cost of goods sold:
Beginning inventory (given) ..................... $ 12,600
Add purchases (Part 2) ............................ 143,400
Goods available for sale ........................... 156,000
Ending inventory (Part 2).........................
9,000
Gross margin ............................................
Less operating expenses:
Salaries and wages (Part 3) .....................
22,500
Shipping (Part 3) ....................................
14,700
Advertising (Part 3) .................................
18,000
Depreciation...........................................
6,000
Other expenses (Part 3) ..........................
9,800
Net operating income ................................
Less interest expense (Part 4).....................
Net income ...............................................
$245,000
147,000
98,000
71,000
27,000
300
$ 26,700
Problem 9-19 (continued)
6. Balance sheet:
NORDIC COMPANY
Balance Sheet
June 30
Assets
Current assets:
Cash (Part 4)................................................................. $ 8,400
Accounts receivable (80% _ $90,000) ..............................
72,000
Inventory (Part 2) ..........................................................
9,000
Total current assets ..........................................................
89,400
Buildings and equipment, net
($214,100 + $14,500 – $6,000) ...................................... 222,600
Total assets ..................................................................... $312,000
Liabilities and Equity
Current liabilities:
Accounts payable (Part 2: 50% _ $46,800)......
Shareholders’ equity:
Capital stock................................................. $190,000
Retained earnings* .......................................
98,600
Total liabilities and equity .................................
* Retained earnings, beginning.....................
Add net income........................................
Total .......................................................
Less dividends .........................................
Retained earnings, ending .........................
$ 75,400
26,700
102,100
3,500
$ 98,600
$ 23,400
288,600
$312,000