managerial accounting 1b ch20 498821

Powerdyne Company s cost of goods sold is consistently 60% of sales. The company plans to carry ending merchandise inventory for each month equal to 40% of the next month s budgeted cost of good sold. All merchandise is purchased on credit, and 50% of the purchases made during a month is paid for in that month. Another 35% is paid for during the first month after purchase, and the remaining 15% is paid for during the second month after purchase. Expected sales are: August (actual), $150,000; September (actual), $350,000; October (estimated), $200,000; November (estimated), $300,000.

Use this information to determine October s expected cash payments for purchases. (Omit the “$” sign in your response.)

Cash payments for purchases

Sand Dollar Company purchases all merchandise on credit. It recently budgeted the following month-end accounts payable balances and merchandise inventory balances. Cash payments on accounts payable during each month are expected to be: May, $1,300,000; June, $1,450,000; July, $1,350,000; and August, $1,400,000.

Accounts
Payable

Merchandise Inventory

May 31

$

120,000

$

250,000

June 30

170,000

400,000

July 31

200,000

300,000

August 31

160,000

330,000

Compute the budgeted amounts of merchandise purchases for June, July, and August. (Omit the “$” sign in your response.)

June

July

August

Budgeted merchandise purchases

$

$

$

Compute the budgeted amounts of cost of goods sold for June, July, and August. (Omit the “$” sign in your response.)

June

July

August

Budgeted cost of goods sold

$

$

$

Budgeted merchandise purchases

Budgeted cost of goods sold

Kool-Ray is preparing its master budget for the quarter ended September 30. Budgeted sales and cash payments for merchandise for the next three months follow:

Sales are 20% cash and 80% on credit. All credit sales are collected in the month following the sale. The June 30 balance sheet includes balances of $12,000 in cash; $45,000 in accounts receivable; $4,500 in accounts payable; and a $2,000 balance in loans payable. A minimum cash balance of $12,000 is required. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 1% per month based on the beginning of the month loan balance and is paid at each month-end. If an excess balance of cash exists, loans are repaid at the end of the month. Operating expenses are paid in the month incurred and consist of sales commissions (10% of sales), office salaries ($4,000 per month), and rent ($6,500 per month).

(1)

Prepare a cash receipts budget for July, August, and September. (Input all amounts as positive values. Omit the “$” sign in your response.)

(2)

Prepare a cash budget for each of the months of July, August, and September. (Input all amounts as positive values. Round your answers to the nearest dollar amount. Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)

Near the end of 2011, the management of Simid Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2011.

To prepare a master budget for January, February, and March of 2012, management gathers the following information.

Simid Sports single product is purchased for $30 per unit and resold for $55 per unit. The expected inventory level of 2,500 units on December 31, 2011, is more than management s desired level for 2012, which is 20% of the next month s expected sales (in units). Expected sales are: January, 3,500 units; February, 4,500 units; March, 5,500 units; and April, 5,000 units.

Cash sales and credit sales represent 25% and 75%, respectively, of total sales. Of the credit sales, 60% is collected in the first month after the month of sale and 40% in the second month after the month of sale. For the December 31, 2011, accounts receivable balance, $62,500 is collected in January and the remaining $200,000 is collected in February.

Merchandise purchases are paid for as follows: 20% in the first month after the month of purchase and 80% in the second month after the month of purchase. For the December 31, 2011, accounts payable balance, $40,000 is paid in January and the remaining $140,000 is paid in February.

Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $30,000 per year.

General and administrative salaries are $72,000 per year. Maintenance expense equals $1,000 per month and is paid in cash.

Equipment reported in the December 31, 2011, balance sheet was purchased in January 2011. It is being depreciated over eight years under the straight-line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter: January, $18,000; February, $48,000; and March, $14,400. This equipment will be depreciated under the straight-line method over eight years with no salvage value. A full month s depreciation is taken for the month in which equipment is purchased.

The company plans to acquire land at the end of March at a cost of $75,000, which will be paid with cash on the last day of the month.

Simid Sports has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and interest is paid at each month-end based on the beginning balance. Partial or full payments on these loans can be made on the last day of the month. The company has agreed to maintain a minimum ending cash balance of $12,500 in each month.

The income tax rate for the company is 40%. Income taxes on the first quarter s income will not be paid until April 15.

Monthly sales budgets. (Omit the “$” sign in your response.)

SIMID SPORTS CO.
Sales Budget
January, February, and March 2012

Budgeted
Units

Budgeted
Unit Price

Budgeted
Total Dollars

January 2012

$

$

February 2012

March 2012

Total for the first quarter

$

SIMID SPORTS CO.
Merchandise Purchases Budget
January, February, and March 2012

January

February

March

Total

Next month s budgeted sales

Ratio of inventory to future sales

%

%

%

Budgeted ending inventory

Add: Budgeted sales

Required units of available merchandise

Deduct: Beginning inventory

Units to be purchased

Budgeted cost per unit

$

$

$

$

Budgeted merchandise purchases

$

$

$

$

Monthly merchandise purchases budgets. (Units to be deducted should be indicated with a minus sign. Omit the “$” & “%” signs in your response.)

Monthly selling expense budgets. (Omit the “$” & “%” signs in your response.)

SIMID SPORTS CO.
Selling Expense Budget
January, February, and March 2012

January

February

March

Total

Budgeted sales

$

$

$

Sales commission percent

%

%

%

Sales commissions expense

$

Sales salaries

Total selling expenses

$

$

$

$

Monthly general and administrative expense budgets. (Do not round your intermediate calculations. Round your final answers to the nearest whole dollar. Omit the “$” sign in your response.)

SIMID SPORTS CO.
General and Administrative Expense Budget
January, February, and March 2012

January

February

March

Total

Salaries

$

$

$

$

Maintenance

Depreciation

Total expenses

$

$

$

$

Monthly capital expenditures budgets. (Leave no cells blank – be certain to enter “0” wherever required. Input all amounts as positive values. Omit the “$” sign in your response.)

SIMID SPORTS CO.
Capital Expenditures Budget
January, February, and March 2012

January

February

March

Equipment purchases

$

$

$

Land purchase

Total

$

$

$

Monthly cash budgets. (Leave no cells blank – be certain to enter “0” wherever required. Input all amounts as positive values except negative preliminary cash balance and repayment of loan to bank which should be indicated by a minus sign. Omit the “$” sign in your response.)

SIMID SPORTS CO.
Cash Budget
January, February, and March 2012

January

February

March

Beginning cash balance

$

$

$

Cash receipts from customers

Total cash available

Cash disbursements

Payments for merchandise

Sales commissions

Sales salaries

General & administrative salaries

Maintenance expense

Interest

Taxes payable

Purchases of equipment

Purchase of land

Total cash disbursements

Preliminary cash balance

Repayment of loan to bank

Ending cash balance

$

$

$

Loan balance, end of month

$

$

$

Budgeted income statement for the entire first quarter (not for each month). (Input all amounts as positive values. Omit the “$” sign in your response.)

SIMID SPORTS CO.
Budgeted Income Statement
For Three Months Ended March 31, 2012

Sales

$

Cost of goods sold

Gross profit

Operating expenses

Sales commissions

$

Sales salaries

General administrative salaries

Maintenance expense

Depreciation expense

Interest expense

Income before taxes

Income taxes

Net income

$

Budgeted balance sheet as of March 31, 2012. (Input all amounts as positive values. Be sure to list the assets in order of their liquidity. Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)

SIMID SPORTS CO.
Budgeted Balance Sheet
March 31, 2012

Assets

Cash

$

Accounts receivable

Inventory

Total Current Assets

Land

Equipment

$

Less: Accumulated depreciation

Total Assets

$

Liabilities and Equity

Accounts payable

$

Bank loan payable

Taxes payable

Total Liabilities

Common stock

$

Retained earnings

Total Stockholders’Equity

Total Liabilities & Equity

$