ACC 252 Lecture Notes - Lecture 7: Cash Cash, European Route E77, Accounts Payable
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Acct 505 project 1 Managerial Accounting 15th Edition Garrison,Noreen, and Brewer 2014 McGraw-Hill
COURSE PROJECT 1 INSTRUCTIONS
You have just been contracted as a budget consultant by LBJCompany, a distributor of bracelets to various retail outletsacross the country. The company has done very little in the way ofbudgeting and at certain times of the year has experienced ashortage of cash.
You have decided to prepare a cash budget for the upcomingfourth quarter in order to show management the benefits that can begained from proper cash planning. You have worked with accountingand other areas to gather the information assembled below.
The company sells many styles of bracelets, but all are sold forthe same $10 price. Actual sales of bracelets for the last threemonths and budgeted sales for the next six months follow:
July (actual) | 20,000 |
August (actual) | 26,000 |
September (actual) | 40,000 |
October (budget) | 70,000 |
November (budget) | 110,000 |
December (budget) | 60,000 |
January (budget) | 30,000 |
February (budget) | 28,000 |
March(budget) | 25,000 |
The concentration of sales in the fourth quarter is due to theChristmas holiday. Sufficient inventory should be on hand at theend of each month to supply 40% of the bracelets sold in thefollowing month.
Suppliers are paid $4 for each bracelet. Fifty-percent of amonth's purchases is paid for in the month of purchase; the other50% is paid for in the following month. All sales are on creditwith no discounts. The company has found, however, that only 20% ofa month's sales are collected in the month of sale. An additional70% is collected in the following month, and the remaining 10% iscollected in the second month following sale. Bad debts have beennegligible.
Monthly operating expenses for the company are given below:
Variable expenses:
Salescommissions 4% of sales
Fixed expenses:
Advertising $220,000
Rent $20,000
Salaries $110,000
Utilities $10,000
Insurance $5,000
Depreciation $18,000
Insurance is paid on an annual basis, in January of eachyear.
The company plans to purchase $22,000 in new equipment duringOctober and $50,000 in new equipment during November; bothpurchases will be for cash. The company declares dividends of$20,000 each quarter, payable in the first month of the followingquarter.
Other relevant data is given below:
Cash balance as of September 30 $74,000
Inventory balance as of September30 $112,000
Merchandise purchases forSeptember $200,000
The company maintains a minimum cash balance of at least $50,000at the end of each month. All borrowing is done at the beginning ofa month; any repayments are made at the end of a month.
The company has an agreement with a bank that allows the companyto borrow the exact amount needed at the beginning of each month.The interest rate on these loans is 1% per month and for simplicitywe will assume that interest is not compounded. At the end of thequarter, the company will pay the bank all of the accrued intereston the loan and as much of the loan as possible while stillretaining at least $50,000 in cash.
Required:
Prepare a cash budget for the three-month period ending December31. Include the following detailed budgets:
1.
a. A sales budget, by monthand in total.
b. A schedule of expectedcash collections from sales, by month and in total.
c. A merchandise purchasesbudget in units and in dollars. Show the budget by month and intotal.
d. A schedule of expectedcash disbursements for merchandise purchases, by month and intotal.
2. A cash budget. Show the budget bymonth and in total. Determine any borrowing that would be needed tomaintain the minimum cash balance of $50,000.
| PROJECT 1 - ExcelTemplate | ||||||
| SALES BUDGET: | ||||||
| October | November | December | Quarter | |||
| Budgeted unit sales | 70,000 | 110,000 | 60,000 | 240,000 | ||
| Selling price per unit | 10 | 10 | 10 | 10 | ||
| Total sales | 700,000 | 1,100,000 | 600,000 | 2,400,000 | ||
| SCHEDULE OF EXPECTED CASHCOLLECTIONS: | ||||||
| October | November | December | Quarter | |||
| August sales | ||||||
| September sales | ||||||
| October sales | ||||||
| November sales | ||||||
| December sales | ||||||
| Total cash collections | ||||||
| MERCHANDISE PURCHASESBUDGET: | ||||||
| October | November | December | Quarter | |||
| Budgeted unit sales | 70,000 | 110,000 | 60,000 | 240,000 | ||
| Add desired endinginventory | ||||||
| Total needs | ||||||
| Less beginning inventory | ||||||
| Required purchases | ||||||
| Cost of purchases @ $4 perunit | ||||||
| BUDGETED CASH DISBURSEMENTSFOR MERCHANDISE PURCHASES: | ||||||
| October | November | December | Quarter | |||
| September purchases | ||||||
| October purchases | ||||||
| November purchases | ||||||
| December purchases | ||||||
| Total cash payments | ||||||
| LBJ COMPANY | ||||||
| CASH BUDGET | ||||||
| FOR THE 3 MONTHS ENDINGDECEMBER 31 | ||||||
| October | November | December | Quarter | |||
| Cash balance | ||||||
| Add collections fromcustomers | ||||||
| Total cash available | ||||||
| Less disbursements | ||||||
| Merchandisepurchases | ||||||
| Advertising | ||||||
| Rent | ||||||
| Salaries | ||||||
| Commissions | ||||||
| Utilities | ||||||
| Equipmentpurchases | ||||||
| Dividendspaid | ||||||
| Total disbursements | ||||||
| Excess (deficiency) ofreceipts | ||||||
| overdisbursements | ||||||
| Financing: | ||||||
| Borrowings | ||||||
| Repayments | ||||||
| Interest | ||||||
| Total financing | ||||||
| Cash balance, ending | ||||||
Acct 505 project 1 Managerial Accounting 15th EditionGarrison, Noreen, and Brewer 2014 McGraw-Hill
COURSE PROJECT 1INSTRUCTIONS
You have just been contracted as a budget consultant byLBJ Company, a distributor of bracelets to various retail outletsacross the country. The company has done very little in the way ofbudgeting and at certain times of the year has experienced ashortage of cash.
You have decided to prepare a cash budget for theupcoming fourth quarter in order to show management the benefitsthat can be gained from proper cash planning. You have worked withaccounting and other areas to gather the information assembledbelow.
The company sells many styles of bracelets, but all aresold for the same $10 price. Actual sales of bracelets for the lastthree months and budgeted sales for the next six monthsfollow:
July (actual) | 20,000 |
August (actual) | 26,000 |
September (actual) | 40,000 |
October(budget) | 70,000 |
November (budget) | 110,000 |
December (budget) | 60,000 |
January(budget) | 30,000 |
February(budget) | 28,000 |
March(budget) | 25,000 |
The concentration of sales in the fourth quarter is dueto the Christmas holiday. Sufficient inventory should be on hand atthe end of each month to supply 40% of the bracelets sold in thefollowing month.
Suppliers are paid $4 for each bracelet. Fifty-percentof a month's purchases is paid for in the month of purchase; theother 50% is paid for in the following month. All sales are oncredit with no discounts. The company has found, however, that only20% of a month's sales are collected in the month of sale. Anadditional 70% is collected in the following month, and theremaining 10% is collected in the second month following sale. Baddebts have been negligible.
Monthly operating expenses for the company are givenbelow:
Variable expenses:
Salescommissions 4% of sales
Fixed expenses:
Advertising $220,000
Rent $20,000
Salaries $110,000
Utilities $10,000
Insurance $5,000
Depreciation $18,000
Insurance is paid on an annual basis, in January of eachyear.
The company plans to purchase $22,000 in new equipmentduring October and $50,000 in new equipment during November; bothpurchases will be for cash. The company declares dividends of$20,000 each quarter, payable in the first month of the followingquarter.
Other relevant data is given below:
Cash balance as of September 30 $74,000
Inventory balance as of September30 $112,000
Merchandise purchases forSeptember $200,000
The company maintains a minimum cash balance of at least$50,000 at the end of each month. All borrowing is done at thebeginning of a month; any repayments are made at the end of amonth.
The company has an agreement with a bank that allows thecompany to borrow the exact amount needed at the beginning of eachmonth. The interest rate on these loans is 1% per month and forsimplicity we will assume that interest is not compounded. At theend of the quarter, the company will pay the bank all of theaccrued interest on the loan and as much of the loan as possiblewhile still retaining at least $50,000 in cash.
Required:
Prepare a cash budget for the three-month period endingDecember 31. Include the following detailed budgets:
1.
a. A sales budget,by month and in total.
b. A schedule ofexpected cash collections from sales, by month and intotal.
c. A merchandisepurchases budget in units and in dollars. Show the budget by monthand in total.
d. A schedule ofexpected cash disbursements for merchandise purchases, by month andin total.
2. A cash budget. Show thebudget by month and in total. Determine any borrowing that would beneeded to maintain the minimum cash balance of$50,000.
| SALESBUDGET: | ||||||
| October | November | December | Quarter | |||
| Budgeted unitsales | ||||||
| Selling price perunit | ||||||
| Total sales | ||||||
| SCHEDULE OF EXPECTEDCASH COLLECTIONS: | ||||||
| October | November | December | Quarter | |||
| August sales | ||||||
| Septembersales | ||||||
| October sales | ||||||
| Novembersales | ||||||
| Decembersales | ||||||
| Total cashcollections | 2,156,000 | |||||
| MERCHANDISE PURCHASESBUDGET: | ||||||
| October | November | December | Quarter | |||
| Budgeted unitsales | ||||||
| Add desired endinginventory | ||||||
| Total needs | ||||||
| Less beginninginventory | ||||||
| Requiredpurchases | ||||||
| Cost of purchases @ $4per unit | ||||||
| BUDGETED CASHDISBURSEMENTS FOR MERCHANDISE PURCHASES: | ||||||
| October | November | December | Quarter | |||
| Septemberpurchases | ||||||
| Octoberpurchases | ||||||
| Novemberpurchases | ||||||
| Decemberpurchases | ||||||
| Total cashpayments | 900,000 | |||||
| LBJCOMPANY | ||||||
| CASHBUDGET | ||||||
| FOR THE 3 MONTHSENDING DECEMBER 31 | ||||||
| October | November | December | Quarter | |||
| Cash balance | ||||||
| Add collections fromcustomers | ||||||
| Total cashavailable | ||||||
| Lessdisbursements | ||||||
| Merchandise purchases | ||||||
| Advertising | ||||||
| Rent | ||||||
| Salaries | ||||||
| Commissions | ||||||
| Utilities | ||||||
| Equipmentpurchases | ||||||
| Dividendspaid | ||||||
| Totaldisbursements | ||||||
| Excess (deficiency) ofreceipts | ||||||
| overdisbursements | ||||||
| Financing: | ||||||
| Borrowings | ||||||
| Repayments | ||||||
| Interest | ||||||
| Totalfinancing | ||||||
| Cash balance,ending | 53,920 | |||||
Acct 505 project 1 Managerial Accounting 15th Edition Garrison,Noreen, and Brewer 2014 McGraw-Hill
COURSE PROJECT 1 INSTRUCTIONS
You have just been contracted as a budget consultant by LBJCompany, a distributor of bracelets to various retail outletsacross the country. The company has done very little in the way ofbudgeting and at certain times of the year has experienced ashortage of cash.
You have decided to prepare a cash budget for the upcomingfourth quarter in order to show management the benefits that can begained from proper cash planning. You have worked with accountingand other areas to gather the information assembled below.
The company sells many styles of bracelets, but all are sold forthe same $10 price. Actual sales of bracelets for the last threemonths and budgeted sales for the next six months follow:
July (actual) | 20,000 |
August (actual) | 26,000 |
September (actual) | 40,000 |
October (budget) | 70,000 |
November (budget) | 110,000 |
December (budget) | 60,000 |
January (budget) | 30,000 |
February (budget) | 28,000 |
March(budget) | 25,000 |
The concentration of sales in the fourth quarter is due to theChristmas holiday. Sufficient inventory should be on hand at theend of each month to supply 40% of the bracelets sold in thefollowing month.
Suppliers are paid $4 for each bracelet. Fifty-percent of amonth's purchases is paid for in the month of purchase; the other50% is paid for in the following month. All sales are on creditwith no discounts. The company has found, however, that only 20% ofa month's sales are collected in the month of sale. An additional70% is collected in the following month, and the remaining 10% iscollected in the second month following sale. Bad debts have beennegligible.
Monthly operating expenses for the company are given below:
Variable expenses:
Salescommissions 4% of sales
Fixed expenses:
Advertising $220,000
Rent $20,000
Salaries $110,000
Utilities $10,000
Insurance $5,000
Depreciation $18,000
Insurance is paid on an annual basis, in January of eachyear.
The company plans to purchase $22,000 in new equipment duringOctober and $50,000 in new equipment during November; bothpurchases will be for cash. The company declares dividends of$20,000 each quarter, payable in the first month of the followingquarter.
Other relevant data is given below:
Cash balance as of September 30 $74,000
Inventory balance as of September30 $112,000
Merchandise purchases forSeptember $200,000
The company maintains a minimum cash balance of at least $50,000at the end of each month. All borrowing is done at the beginning ofa month; any repayments are made at the end of a month.
The company has an agreement with a bank that allows the companyto borrow the exact amount needed at the beginning of each month.The interest rate on these loans is 1% per month and for simplicitywe will assume that interest is not compounded. At the end of thequarter, the company will pay the bank all of the accrued intereston the loan and as much of the loan as possible while stillretaining at least $50,000 in cash.
Required:
Prepare a cash budget for the three-month period ending December31. Include the following detailed budgets:
1.
a. A sales budget, by monthand in total.
b. A schedule of expectedcash collections from sales, by month and in total.
c. A merchandise purchasesbudget in units and in dollars. Show the budget by month and intotal.
d. A schedule of expectedcash disbursements for merchandise purchases, by month and intotal.
2. A cash budget. Show the budget bymonth and in total. Determine any borrowing that would be needed tomaintain the minimum cash balance of $50,000.
| BUDGETED CASHDISBURSEMENTS FOR MERCHANDISE PURCHASES: | ||||||
| October | November | December | Quarter | |||
| September purchases | ||||||
| October purchases | ||||||
| November purchases | ||||||
| December purchases | ||||||
| Total cash payments | ||||||
