10.
value:
3.00 points
Problem 4-19 Schedule of cash receipts [LO2]
Watt's Lighting Stores made the following sales projections for the next six months. All sales are credit
sales.
March
April
May
$ 48,000
54,000
43,000
June $ 52,000
July
60,000
August 62,000
Sales
in
January
and
February
were
$51,000
and
$50,000,
respectively.
Experience has shown that of total sales, 10 percent are uncollectible, 35 percent are collected in the
month of sale, 45 percent are collected in the following month, and 10 percent are collected two months
after sale.
(a) Prepare a monthly cash receipts schedule for the firm for March through August. (Omit the "$" sign
in your response.)
January
Sales
$
51000
February
$
50000
WATT'S LIGHTING STORES
Cash Receipts Schedule
March
April
$
48000
$
54000
May
$
43000
June
$
52000
Collections of current sales
16800
18900
15050
18200
Collections of prior month's sales
22500
21600
24300
19350
Collections of sales 2 months
earlier
5100
5000
4800
5400
Total cash receipts
$
92400
$
99500
$
87150
(b) Of the sales expected to be made during the six months from March through August, how much will
still be uncollected at the end of August? How much of this is expected to be collected later? (Omit
the "$" sign in your response.)
Amount
$
94950
Uncollected
$
Expected to be collected
$
31900
33900
VOLT BATTERY COMPANY
Summary of Cash payments
Dec.
Units
produced
Material
cost
Labor
cost
Overhead
cost
Jan.
Feb.
March
$
$
$
$
$
$
Interest
Employee
bonuses
Total
cash
payments
11.
value:
4.00 points
Problem 4-23 Schedule of cash payments [LO2]
The Volt Battery Company has forecast its sales in units as follows:
January
February
March
April
2,300 May
2,150 June
2,100 July
2,600
2,850
3,000
2,700
Volt Battery always keeps an ending inventory equal to 130% of the next month's expected sales. The
ending inventory for December (January's beginning inventory) is 2,990 units, which is consistent with
this policy.
Materials cost $12 per unit and are paid for in the month after purchase. Labor cost is $5 per unit and
is paid in the month the cost is incurred. Overhead costs are $13,500 per month. Interest of $9,500 is
scheduled to be paid in March, and employee bonuses of $14,700 will be paid in June.
(a) Prepare a monthly production schedule for January through June.
Jan.
VOLT BATTERY COMPANY
Production Schedule
Feb.
March
April
May
Forecasted unit sales
2300
2150
2100
2600
2850
Desired ending inventory
2795
2730
3380
3705
3900
Beginning inventory
2990
2795
2730
2750
3705
Units to be produced
2495
2085
2750
3555
3045
(b) Prepare a monthly summary of cash payments for January through June. Volt produced 2,100 units
in December. (Omit the "$" sign in your response.)
12.
value:
5.00 points
Problem 4-25 Complete cash budget [LO2]
Harry's Carryout Stores has eight locations. The firm wishes to expand by two more stores and needs a
bank loan to do this. Mr. Wilson, the banker, will finance construction if the firm can present an
acceptable three-month financial plan for January through March. The following are actual and
forecasted sales figures:
Actual
Forecast
Additional Information
November $ 270,000 January
$ 420,000 April forecast $ 410,000
December
360,000 February
460,000
March
420,000
Of the firm's sales, 30 percent are for cash and the remaining 70 percent are on credit. Of credit sales,
40 percent are paid in the month after sale and 60 percent are paid in the second month after the sale.
Materials cost 40 percent of sales and are purchased and received each month in an amount sufficient to
cover the following month's expected sales. Materials are paid for in the month after they are received.
Labor expense is 25 percent of sales and is paid for in the month of sales. Selling and administrative
expense is 25 percent of sales and is also paid in the month of sales. Overhead expense is $31,500 in
cash per month.
Depreciation expense is $10,700 per month. Taxes of $8,700 will be paid in January, and dividends of
$5,500 will be paid in March. Cash at the beginning of January is $94,000, and the minimum desired
cash balance is $89,000.
(a) Prepare a schedule of monthly cash receipts for January, February and March. (Omit the "$" sign in
your response.)
November
Sales
$
HARRY’S CARRY-OUT STORES
Cash Receipts Schedule
December
January
$
February
March
$
$
$
$
$
$
Cash sales
Credit sales
Collections in the month
after credit sales)
Collections two months
after credit sales)
Total cash receipts
(b) Prepare a schedule of monthly cash payments for January, February and March. (Omit the "$" sign
in your response.)
HARRY’S CARRY-OUT STORES
Cash Payments Schedule
January
February
Payments for purchases
Labor expense
Selling and admin. exp.
Overhead
$
$
March
$
Taxes
Dividends
Total cash payments
$
$
$
(c) Prepare a schedule of monthly cash budget with borrowings and repayments for January, February
and March. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts
should be indicated by a minus sign. Omit the "$" sign in your response.)
HARRY’S CARRY-OUT STORES
Cash Budget
January
February
Total cash receipts
March
$
$
$
$
$
$
Total cash payments
Net cash flow
Beginning cash balance
Cumulative cash balance
Monthly loan or (repayment)
Cumulative loan balance
Ending cash balance
13.
value:
1.00 points
Problem 4-28 Percent-of-sales method [LO3]
The Manning Company has financial statements as shown below, which are representative of the
company’s historical average.
The firm is expecting a 40 percent increase in sales next year, and management is concerned about
the company’s need for external funds. The increase in sales is expected to be carried out without any
expansion of fixed assets, but rather through more efficient asset utilization in the existing store. Among
liabilities, only current liabilities vary directly with sales.
Income Statement
Sales
Expenses
Earnings
before
interest
and taxes
Interest
$
300,000
246,800
$
53,200
9,100
Earnings
before
taxes
Taxes
$
44,100
17,100
Earnings
after taxes
Dividends
$
27,000
$
5,400
Balance Sheet
Liabilities and Stockholders' Equity
Accounts
9,000
$
29,000
payable
Accrued
56,000
2,250
wages
70,000 Accrued taxes
4,750
Assets
Cash
$
Accounts
receivable
Inventory
Current
assets
Fixed
assets
Current
liabilities
Notes
86,000
payable
Long-term
debt
Common
stock
Retained
earnings
$
Total
assets
135,000
Total liabilities
and
stockholders'
221,000 equity
$
$
36,000
9,100
25,500
125,000
25,400
$
221,000
Using the percent-of-sales method, determine the amount of external financing needs, or a surplus of
funds required by the company. (Hint: A profit margin and payout ratio must be found from the income
statement.) (Do not round intermediate calculations. Input the amount as positive value. Omit the
"$" sign in your response.)
The firm
in
(Click to select)
(Click to select)
rev: 09_10_2011
$
.
check my workeBook Linkreferences
16.
value:
1.00 points
Problem 5-8 Cash break-even analysis [LO2]
Air Purifier, Inc., computes its break-even point strictly on the basis of cash expenditures related to fixed
costs. Its total fixed costs are $2,410,000, but 10 percent of this value is represented by depreciation. Its
contribution margin (price minus variable cost) for each unit is $32. How many units does the firm need
to sell to reach the cash break-even point? (Round your answer to the nearest whole number.)
Cash break-even point
units
check my workeBook Linkreferences
23.
value:
2.00 points
Problem 5-20 Combining operating and financial leverage [LO5]
Sinclair Manufacturing and Boswell Brothers Inc. are both involved in the production of brick for the
homebuilding industry. Their financial information is as follows:
Debt @ 11%
Common
stock, $10 per
share
Total
Common
shares
Operating
Plan
Sales (61,000
units at $20
each)
Less:
Variable costs
Capital Structure
Sinclair
$
1,260,000
$
0
840,000
$
2,100,000
2,100,000
$
2,100,000
84,000
$
1,220,000
210,000
$
976,000
1,220,000
610,000
($
16 per unit)
0
($
10 per unit)
311,000
$
244,000
$
299,000
Fixed costs
Earnings
before interest
and taxes
(EBIT)
Boswell
(a) If you combine Sinclair’s capital structure with Boswell’s operating plan, what is the degree of
combined leverage? (Enter only numeric value rounded to 2 decimal places.)
Degree of combined leverage
(b) If you combine Boswell’s capital structure with Sinclair’s operating plan, what is the degree of
combined leverage? (Enter only numeric value.)
Degree of combined leverage
(d) In part b, if sales double, by what percentage will EPS increase? (Omit the "%" sign in your
response.)
EPS will increase by
%
check my workeBook Linkreferences
24.
value:
3.00 points
Problem 5-23 Leverage and sensitivity analysis [LO6]
Dickinson Company has $11,840,000 in assets. Currently half of these assets are financed with longterm debt at 9.2 percent and half with common stock having a par value of $8. Ms. Smith, vice-president
of finance, wishes to analyze two refinancing plans, one with more debt (D) and one with more equity
(E). The company earns a return on assets before interest and taxes of 9.2 percent. The tax rate is 45
percent.
Under Plan D, a $2,960,000 long-term bond would be sold at an interest rate of 11.2 percent and
370,000 shares of stock would be purchased in the market at $8 per share and retired.
Under Plan E, 370,000 shares of stock would be sold at $8 per share and the $2,960,000 in proceeds
would be used to reduce long-term debt.
(a) Compute the earnings per share for the current plan and the two new plans. (Round your answers
to 2 decimal places. Omit the "$" sign in your response.)
Current Plan
Earnings per share
$
.40
Plan D
$
.013
Plan E
$
1.01
(b-1) Compute the earnings per share if return on assets fell to 4.60 percent. (Round your answers to 2
decimal places. Leave no cells blank - be certain to enter "0" wherever required. Negative
amounts should be indicated by a minus sign. Omit the "$" sign in your response.)
Current Plan
Earnings per share
$
Plan D
Plan E
$
$
(b-2) Which plan would be most favorable if return on assets fell to 4.60 percent? Consider the current
plan and the two new plans.
Plan D
Current Plan
Plan E
(b-3) Compute the earnings per share if return on assets increased to 14.2 percent. (Round your
answers to 2 decimal places. Omit the "$" sign in your response.)
Current Plan
Earnings per share
$
Plan D
Plan E
$
$
(b-4) Which plan would be most favorable if return on assets increased to 14.2 percent? Consider the
current plan and the two new plans.
Plan D
Plan E
Current Plan
(c-1) If the market price for common stock rose to $10 before the restructuring, compute the earnings per
share. Continue to assume that $2,960,000 in debt will be used to retire stock in Plan D and
$2,960,000 of new equity will be sold to retire debt in Plan E. Also assume that return on assets is
9.2 percent. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)
Current Plan
Earnings per share
$
Plan D
Plan E
$
$
(c-2) If the market price for common stock rose to $10 before the restructuring, which plan would then be
most attractive?
Current Plan
Plan E
Plan D