ADMS 2500 Chapter : Budget Note
ADMS 2500 Full Course Notes
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Related Questions
| bacus Company sells its productfor $220 per unit. Its actual and projected sales follow. |
| Units | Dollars | |
| April (actual) | 9,500 | $2,090,000 |
| May (actual) | 2,400 | 528,000 |
| June (budgeted) | 6,000 | 1,320,000 |
| July (budgeted) | 5,500 | 1,210,000 |
| August(budgeted) | 4,000 | 880,000 |
All sales are on credit. Recent experience shows that 24% ofcredit sales is collected in the month of the sale, 46% in themonth after the sale, 24% in the second month after the sale, and6% proves to be uncollectible. The productâs purchase price is $110per unit. All purchases are payable within 12 days. Thus, 60% ofpurchases made in a month is paid in that month and the other 40%is paid in the next month. The company has a policy to maintain anending monthly inventory of 20% of the next monthâs unit sales plusa safety stock of 75 units. The April 30 and May 31 actualinventory levels are consistent with this policy. Selling andadministrative expenses for the year are $1,536,000 and are paidevenly throughout the year in cash. The companyâs minimum cashbalance at month-end is $82,000. This minimum is maintained, ifnecessary, by borrowing cash from the bank. If the balance exceeds$82,000, the company repays as much of the loan as it can withoutgoing below the minimum. This type of loan carries an annual 13%interest rate. On May 31, the loan balance is $48,500, and thecompanyâs cash balance is $82,000. |
References
Section BreakLearning Objective: 23-C2 Describea master budget and the process of preparing it.
Difficulty: HardLearning Objective: 23-P2 Linkboth operating and capital expenditures budgets to budgetedfinancial statements.
2.
value:
1.78 points
Required information
| Required: | |
| 1. | Prepare a table that shows the computation of cash collectionsof its credit sales (accounts receivable) in each of the months ofJune and July. (Omit the "$" & "%" signs in yourresponse.) |
| Cash collections of credit sales(accounts receivable) |
| From sales in | Total | %Collected | June | July |
| April | $ | % | $ | |
| May | ||||
| $ | ||||
| June | ||||
| July | ||||
| Total collected | $ | $ | ||
References
eBook & Resources
WorksheetLearning Objective: 23-C2 Describe amaster budget and the process of preparing it.
Difficulty: HardLearning Objective: 23-P2 Linkboth operating and capital expenditures budgets to budgetedfinancial statements.
Check my work
3.
value:
1.78 points
Required information
| 2. | Prepare a table that shows the computation of budgeted endinginventories (in units) for April, May, June, and July.(Omit the "%" sign in your response.) |
| Budgeted ending inventories (inunits) |
| April | May | June | July | |
| Next monthâsbudgeted sales | ||||
| Ratio of inventoryto future sales | % | % | % | % |
| Budgeted âbaseâending inventory | ||||
| Plus safetystock | ||||
| Budgeted endinginventory | ||||
References
eBook & Resources
WorksheetLearning Objective: 23-C2 Describe amaster budget and the process of preparing it.
Difficulty: HardLearning Objective: 23-P2 Linkboth operating and capital expenditures budgets to budgetedfinancial statements.
Check my work
4.
value:
1.78 points
Required information
| 3. | Prepare the merchandise purchases budget for May, June, andJuly. Report calculations in units and then show the dollar amountof purchases for each month. (Amounts to be deducted shouldbe indicated with a minus sign. Omit the "$" sign in yourresponse.) |
| ABACUS COMPANY Merchandise Purchases Budgets For May, June, and July | |||
| May | June | July | |
| (Click toselect)Payments on purchasesBudgeted ending inventoryBeginninginventoryBudgeted beginning inventoryBudgeted purchases | |||
| (Click toselect)Payments on purchasesAdd: Budgeted salesBudgetedpurchasesDeduct: Budgeted salesBudgeted beginning inventory | |||
| Required units ofavailable merchandise | |||
| (Click toselect)Budgeted purchases (units)Deduct: Beginning inventoryAdd:Beginning inventoryBudgeted ending inventoryBudgeted sales | |||
| (Click toselect)Beginning inventoryBudgeted salesBudgeted beginninginventoryBudgeted purchasesBudgeted ending inventory | |||
| (Click toselect)Payments on purchasesBudgeted ending inventoryBeginninginventoryBudgeted salesBudgeted cost per unit | $ | $ | $ |
| Budgeted cost ofmerchandise purchases | $ | $ | $ |
References
eBook & Resources
WorksheetLearning Objective: 23-C2 Describe amaster budget and the process of preparing it.
Difficulty: HardLearning Objective: 23-P2 Linkboth operating and capital expenditures budgets to budgetedfinancial statements.
Check my work
5.
value:
1.78 points
Required information
| 4. | Prepare a table showing the computation of cash payments onproduct purchases for June and July.(Round your answers tothe nearest dollar amount. Omit the "$" & "%" signs in yourresponse.) |
| Cash payments on productpurchases (for June and July) |
| From purchasesin | Total | % Paid | June | July |
| May | $ | % | $ | |
| June | ||||
| $ | ||||
| July | ||||
| Total Paid | $ | $ | ||
References
eBook & Resources
WorksheetLearning Objective: 23-C2 Describe amaster budget and the process of preparing it.
Difficulty: HardLearning Objective: 23-P2 Linkboth operating and capital expenditures budgets to budgetedfinancial statements.
Check my work
6.
value:
1.78 points
Required information
| 5. | Prepare a cash budget for June and July, including any loanactivity and interest expense. Compute the loan balance at the endof each month. (Leave no cells blank - be certain to enter"0" wherever required. Input all amounts as positive values exceptpreliminary cash balance and any repayments to bank which should beindicated by a minus sign. Round intermediate calculations andfinal answers to the nearest dollar amount. Omit the "$" sign inyour response.) |
| ABACUS COMPANY Cash Budget June and July | ||
| June | July | |
| (Click toselect)Additional loan from bankSelling and administrativeexpensesPayments on purchasesBeginning cash balanceInterestexpense | $ | $ |
| (Click toselect)Selling and administrative expensesCash receipts fromcustomersPayments on purchasesInterest expenseAdditional loan frombank | ||
| Total availablecash | ||
| Cashdisbursements | ||
| (Click to select)Payments onpurchasesPreliminary cash balanceCash receipts fromcustomersAdditional loan from bankRepayment of loan to bank | ||
| (Click to select)Additional loan frombankRepayment of loan to bankCash receipts fromcustomersPreliminary cash balanceSelling and administrativeexpenses | ||
| (Click to select)Cash receipts fromcustomersInterest expensePreliminary cash balanceAdditional loanfrom bankRepayment of loan to bank | ||
| Total disbursements | ||
| (Click toselect)Payments on purchasesInterest expenseCash receipts fromcustomersPreliminary cash balanceSelling and administrativeexpenses | ||
| (Click toselect)Payments on purchasesSelling and administrativeexpensesInterest expenseCash receipts from customersAdditional loanfrom bank | ||
| (Click toselect)Cash receipts from customersSelling and administrativeexpensesPayments on purchasesInterest expenseRepayment of loan tobank | ||
| (Click toselect)Ending cash balancePayments on purchasesPreliminary cashbalanceEnding loan balanceAdditional loan from bank | $ | $ |
| (Click toselect)Ending cash balanceEnding loan balancePayments onpurchasesAdditional loan from bankPreliminary cash balance | $ | $ |
| Abacus Company sells its productfor $220 per unit. Its actual and projected sales follow. |
| Units | Dollars | |
| April (actual) | 9,500 | $2,090,000 |
| May (actual) | 2,400 | 528,000 |
| June (budgeted) | 6,000 | 1,320,000 |
| July (budgeted) | 5,500 | 1,210,000 |
| August(budgeted) | 4,000 | 880,000 |
All sales are on credit. Recent experience shows that 24% ofcredit sales is collected in the month of the sale, 46% in themonth after the sale, 24% in the second month after the sale, and6% proves to be uncollectible. The productâs purchase price is $110per unit. All purchases are payable within 12 days. Thus, 60% ofpurchases made in a month is paid in that month and the other 40%is paid in the next month. The company has a policy to maintain anending monthly inventory of 20% of the next monthâs unit sales plusa safety stock of 75 units. The April 30 and May 31 actualinventory levels are consistent with this policy. Selling andadministrative expenses for the year are $1,536,000 and are paidevenly throughout the year in cash. The companyâs minimum cashbalance at month-end is $82,000. This minimum is maintained, ifnecessary, by borrowing cash from the bank. If the balance exceeds$82,000, the company repays as much of the loan as it can withoutgoing below the minimum. This type of loan carries an annual 13%interest rate. On May 31, the loan balance is $48,500, and thecompanyâs cash balance is $82,000. |
| Required: | |
| 1. | Prepare a table that shows the computation of cash collectionsof its credit sales (accounts receivable) in each of the months ofJune and July. (Omit the "$" & "%" signs in yourresponse.) |
| Cash collections of credit sales(accounts receivable) |
| From sales in | Total | %Collected | June | July |
| April | $ | % | $ | |
| May | ||||
| $ | ||||
| June | ||||
| July | ||||
| Total collected | $ | $ | ||
References
eBook & Resources
WorksheetLearning Objective: 23-C2 Describe amaster budget and the process of preparing it.
Difficulty: HardLearning Objective: 23-P2 Linkboth operating and capital expenditures budgets to budgetedfinancial statements.
Check my work
3.
value:
1.78 points
Required information
| 2. | Prepare a table that shows the computation of budgeted endinginventories (in units) for April, May, June, and July.(Omit the "%" sign in your response.) |
| Budgeted ending inventories (inunits) |
| April | May | June | July | |
| Next monthâsbudgeted sales | ||||
| Ratio of inventoryto future sales | % | % | % | % |
| Budgeted âbaseâending inventory | ||||
| Plus safetystock | ||||
| Budgeted endinginventory | ||||
References
eBook & Resources
WorksheetLearning Objective: 23-C2 Describe amaster budget and the process of preparing it.
Difficulty: HardLearning Objective: 23-P2 Linkboth operating and capital expenditures budgets to budgetedfinancial statements.
Check my work
4.
value:
1.78 points
Required information
| 3. | Prepare the merchandise purchases budget for May, June, andJuly. Report calculations in units and then show the dollar amountof purchases for each month. (Amounts to be deducted shouldbe indicated with a minus sign. Omit the "$" sign in yourresponse.) |
| ABACUS COMPANY Merchandise Purchases Budgets For May, June, and July | |||
| May | June | July | |
| (Click toselect)Budgeted purchasesBudgeted ending inventoryPayments onpurchasesBeginning inventoryBudgeted beginning inventory | |||
| (Click toselect)Add: Budgeted salesBudgeted beginning inventoryBudgetedpurchasesPayments on purchasesDeduct: Budgeted sales | |||
| Required units ofavailable merchandise | |||
| (Click toselect)Budgeted ending inventoryDeduct: Beginning inventoryBudgetedpurchases (units)Add: Beginning inventoryBudgeted sales | |||
| (Click toselect)Budgeted purchasesBudgeted salesBeginning inventoryBudgetedbeginning inventoryBudgeted ending inventory | |||
| (Click toselect)Payments on purchasesBeginning inventoryBudgeted endinginventoryBudgeted cost per unitBudgeted sales | $ | $ | $ |
| Budgeted cost ofmerchandise purchases | $ | $ | $ |
References
eBook & Resources
WorksheetLearning Objective: 23-C2 Describe amaster budget and the process of preparing it.
Difficulty: HardLearning Objective: 23-P2 Linkboth operating and capital expenditures budgets to budgetedfinancial statements.
Check my work
5.
value:
1.78 points
Required information
| 4. | Prepare a table showing the computation of cash payments onproduct purchases for June and July.(Round your answers tothe nearest dollar amount. Omit the "$" & "%" signs in yourresponse.) |
| Cash payments on productpurchases (for June and July) |
| From purchasesin | Total | % Paid | June | July |
| May | $ | % | $ | |
| June | ||||
| $ | ||||
| July | ||||
| Total Paid | $ | $ | ||
References
eBook & Resources
WorksheetLearning Objective: 23-C2 Describe amaster budget and the process of preparing it.
Difficulty: HardLearning Objective: 23-P2 Linkboth operating and capital expenditures budgets to budgetedfinancial statements.
Check my work
6.
value:
1.78 points
Required information
| 5. | Prepare a cash budget for June and July, including any loanactivity and interest expense. Compute the loan balance at the endof each month. (Leave no cells blank - be certain to enter"0" wherever required. Input all amounts as positive values exceptpreliminary cash balance and any repayments to bank which should beindicated by a minus sign. Round intermediate calculations andfinal answers to the nearest dollar amount. Omit the "$" sign inyour response.) |
| ABACUS COMPANY Cash Budget June and July | ||
| June | July | |
| (Click toselect)Beginning cash balancePayments on purchasesAdditional loanfrom bankSelling and administrative expensesInterest expense | $ | $ |
| (Click toselect)Payments on purchasesAdditional loan from bankInterestexpenseSelling and administrative expensesCash receipts fromcustomers | ||
| Total availablecash | ||
| Cashdisbursements | ||
| (Click to select)Repayment of loan tobankPreliminary cash balancePayments on purchasesAdditional loanfrom bankCash receipts from customers | ||
| (Click to select)Repayment of loan tobankAdditional loan from bankPreliminary cash balanceSelling andadministrative expensesCash receipts from customers | ||
| (Click to select)InterestexpensePreliminary cash balanceCash receipts fromcustomersRepayment of loan to bankAdditional loan from bank | ||
| Total disbursements | ||
| (Click toselect)Cash receipts from customersInterest expenseSelling andadministrative expensesPreliminary cash balancePayments onpurchases | ||
| (Click toselect)Payments on purchasesCash receipts from customersSelling andadministrative expensesInterest expenseAdditional loan frombank | ||
| (Click toselect)Interest expensePayments on purchasesSelling andadministrative expensesRepayment of loan to bankCash receipts fromcustomers | ||
| (Click toselect)Ending loan balancePayments on purchasesAdditional loan frombankPreliminary cash balanceEnding cash balance | $ | $ |
| (Click toselect)Preliminary cash balancePayments on purchasesAdditional loanfrom bankEnding cash balanceEnding loan balance | $ | $ |
