Problem 9-20 (120 minutes)
1. Schedule of expected cash collections:
January February
March
Quarter
Cash sales......................................................................
$28,000 $32,000 $34,000 $ 94,000
Credit sales* ..................................................................
36,000
42,000 48,000 126,000
Total collections ...........................................................
$64,000 $74,000 $82,000 $220,000
*60% of the preceding month’s sales.
2. Inventory purchases budget:
January February
March
Quarter
Budgeted cost of goods sold
(70% of sales).............................................................
$49,000 $56,000 $59,500 $164,500
Add desired ending
inventory* ...................................................................
11,200
11,900
7,700
7,700
Total needs ....................................................................
60,200
67,900
67,200
172,200
Less beginning inventory ................................................
9,800
11,200
11,900
9,800
Required purchases ........................................................
$50,400 $56,700 $55,300 $162,400
*At March 30: April sales $55,000 × 70% × 20% = $7,700.
Schedule of Expected Cash Disbursements—Purchases
January February
March
Quarter
December purchases ......................................................
$32,550
$ 32,550
January purchases .........................................................
12,600 $37,800
50,400
February purchases ........................................................
14,175 $42,525
56,700
March purchases ............................................................
13,825
13,825
Total disbursements .......................................................
$45,150 $51,975 $56,350 $153,475
Problem 9-20 (continued)
3. Schedule of Expected Cash Disbursements—Operating Expenses
January February
March
Salaries and wages.........................................................
$12,000 $12,000 $12,000
Rent ..............................................................................
1,800
1,800
1,800
Other expenses ..............................................................
5,600
6,400
6,800
Total disbursements .......................................................
$19,400 $20,200 $20,600
Quarter
$36,000
5,400
18,800
$60,200
4. Cash budget:
January February
March
Cash balance, beginning .................................................
$ 6,000 $ 5,450 $ 5,275
Add cash collections .......................................................
64,000
74,000
82,000
Total cash available ......................................................
70,000
79,450
87,275
Less disbursements:
For inventory ...............................................................
45,150
51,975
56,350
For operating expenses ................................................
19,400
20,200
20,600
For equipment .............................................................
3,000
8,000
0
Total disbursements .......................................................
67,550
80,175
76,950
Excess (deficiency) of cash .............................................
2,450
(725) 10,325
Financing:
Borrowings ..................................................................
3,000
6,000
0
Repayments ................................................................
0
0
(5,000)
Interest* .....................................................................
0
0
(130)
Total financing ...............................................................
3,000
6,000
(5,130)
Cash balance, ending .....................................................
$ 5,450 $ 5,275 $ 5,195
* $3,000 × 12% × 3/12 =
2,000 × 12% × 2/12 =
Total interest
$ 90
40
$130
Quarter
$ 6,000
220,000
226,000
153,475
60,200
11,000
224,675
1,325
9,000
(5,000)
(130)
3,870
$ 5,195
Problem 9-20 (continued)
5.
PICANUY CORPORATION
Income Statement
For the Quarter Ended March 31
Sales ($70,000 + $80,000 + $85,000) .............................
$235,000
Less cost of goods sold:
Beginning inventory (Given) .........................................
$ 9,800
Add purchases (Part 2) .................................................
162,400
Goods available for sale ................................................
172,200
Less ending inventory (Part 2) ......................................
7,700 164,500
Gross margin.................................................................. 70,500
Less operating expenses:
Salaries and wages (Part 3) ..........................................
36,000
Rent (Part 3) ...............................................................
5,400
Depreciation (Given) ....................................................
2,400
Other expenses (Part 3) ...............................................
18,800
62,600
Net operating income ..................................................... 7,900
Less interest expense*....................................................
210
Net income ....................................................................$ 7,690
*Interest paid of $130 plus accrued, but unpaid, interest on the
outstanding loan of $4,000 × 12% × 2/12 = $80.
Problem 9-20 (continued)
6.
PICANUY CORPORATION
Balance Sheet
March 31
Assets
Current assets:
Cash (Part 4) ............................................................... $ 5,195
Accounts receivable ($85,000 × 60%)...........................
51,000
Inventory (Part 2) ........................................................
7,700
Total current assets ........................................................
63,895
Fixed assets—net
($110,885 + $3,000 + $8,000 – $2,400) ....................... 119,485
Total assets .................................................................... $183,380
Liabilities and Equity
Accounts payable (Part 2: $55,300 × 75%) ...................... $ 41,475
Interest payable .............................................................
80
Bank loan payable ..........................................................
4,000
Stockholders’ equity:
Capital stock (Given) ....................................................
$100,000
Retained earnings* ......................................................
37,825 137,825
Total liabilities and equity ................................................ $183,380
* Retained earnings, beginning ..........................................
$30,135
Add net income..............................................................
7,690
Retained earnings, ending ..............................................
$37,825