Reference no: EM13670228
PROBLEM 7–22B Schedule of Expected Cash Collections; Cash Budget [LO2, LO8]
CHECK FIGURE
(1) May: $217,480
(2) May ending cash balance: $20,520
Madeleine Bohne, president of the retailer Bohne Products, has just approached the company’s bank with a request for a $34,000, 90-day loan. The purpose of the loan is to assist the company in acquiring inventories in support of peak April sales. Because the company has had some difficulty in paying off its loans in the past, the loan officer has asked for a cash budget to help determine whether the loan should be made. The following data are available for the months April–June, during which the loan will be used:
a. On April 1, the start of the loan period, the cash balance will be $29,000. Accounts receivable on April 1 will total $135,000, of which $127,500 will be collected during April and $5,000 will be collected during May. The remainder will be uncollectible.
b. Past experience shows that 19% of a month’s sales are collected in the month of sale, 74% in the month following sale, and 4% in the second month following sale. The other 3% represents bad debts that are never collected. Budgeted sales and expenses for the three-month period follow:
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April
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May
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June
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Sales (all on account)
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$206,000
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$316,000
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$346,000
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Merchandise purchases
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$119,500
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$169,500
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$149,500
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Payroll
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$9,000
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$9,000
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$8,000
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Lease payments
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$13,300
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$13,300
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$13,300
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Advertising
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$71,500
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$74,200
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$57,200
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Equipment purchases
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$8,600
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−
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−
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Depreciation
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$9,600
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$9,600
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$9,600
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c. Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases on March 31, which will be paid during April, total $108,200.
d. In preparing the cash budget, assume that the $34,000 loan will be made in April and repaid in June. Interest on the loan will total $820.
Required:
1. Prepare a schedule of expected cash collections for April, May, and June and for the three months in total.
2. Prepare a cash budget, by month and in total, for the three-month period.
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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Determine the cost assigned to ending inventory
: Determine the cost assigned to ending inventory and to cost of goods sold using LIFO and Determine the cost assigned to ending inventory and to cost of goods sold using LIFO.
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Complete the following statements
: Using the data above, complete the following statements and schedules for the second quarter:
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Prepare an absorption costing income statement
: Prepare an absorption costing income statement similar to Schedule 9 for the quarter ending June 30. (Use the functional format in preparing your income statement, as shown in Schedule 9 in the text.)
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A schedule of expected cash collections on sales
: 1. Prepare the following, by quarter and in total, for Year 2: a. A schedule of expected cash collections on sales.b. A schedule of expected cash disbursements for merchandise purchases.
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Prepare a schedule of expected cash collections
: Prepare a schedule of expected cash collections for April, May, and June and for the three months in total. 2. Prepare a cash budget, by month and in total, for the three-month period.
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Prepare a schedule of expected cash collections
: Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total.
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Prepare a cash budget for june
: Prepare a cash budget for June. Support your budget with a schedule of expected cash collections from sales and a schedule of expected cash disbursements for inventory purchases.
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Prepare a sales budget
: Prepare a sales budget, by month and in total, for the third quarter. (Show your budget in both pairs of swim fins and dollars.) Also prepare a schedule of expected cash collections, by month and in total, for the third quarter.
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Using the presidents new assumptions
: Using the president’s new assumptions in (1) above, prepare a schedule of expected cash collections for July, August, and September and for the quarter in total.
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