Answer:
Garden Sales, Inc.
April May June Total
1. Cash Collections:
Cash sales (20%) $92,000 $198,000 $88,000 $378,000
Credit sales:
10% month of sale 36,800 79,200 35,200 151,200
70% month following sale 123,200 257,600 554,400 935,200
20% second month following 25,600 35,200 73,600 134,400
Total cash collections $277,600 $570,000 $751,200 $1,598,800
2. Merchandise Inventory:
a. Purchases Budget April May June
Cost of goods sold 322,000 693,000 308,000
Ending inventory (15%) 103,950 46,200 35,700
Goods available for sale 425,950 739,200 343,700
Beginning inventory 84,000 103,950 46,200
Purchases 341,950 635,250 297,500
b. Cash payment for purchases:
50% month of purchase 170,975 317,625 148,750 637,350
50% month following purchase 126,000 170,975 317,625 614,600
Total payment for purchases $296,975 $488,600 $466,375 $1,251,950
3. Cash Budget
April May June Total
Beginning cash balance $46,000 $40,225 $40,425 $46,000
Total cash collections 311,200 652,800 727,600 $1,691,600
Cash available $357,200 $693,025 $768,025 $1,737,600
Payment for purchases $296,975 $488,600 $466,375 $1,251,950
Other payments:
Dividends 24,000 24,000
Land purchase 32,000 32,000
Selling & administrative exp. 115,000 134,000 73,400 322,400
Total cash payments $435,975 $654,600 $539,775 $1,630,350
Cash Balance (78,775) 38,425 228,250 228,250
Minimum Cash balance (40,000) (40,000)
Cash required $118,775 $1,575 0 0
Cash borrowed $119,000 $2,000 (123,400) (123,400)
Ending balance 40,225 40,425 104,850 104,850
4. To: The President
From: FC
Subject: Revised Estimates and the Cash Budget
Date: April 26, 2021
The revised estimates will ensure that the company has the ability to pay off its borrowings in April and May by the end of the second quarter.
It should be maintained.
Regards,
Explanation:
a) Data and Calculations:
Budgeted monthly absorption costing income statements for April-July are:
April May June July
Sales $460,000 $990,000 $440,000 $340,000
Cost of goods sold 322,000 693,000 308,000 238,000
Gross margin 138,000 297,000 132,000 102,000
Selling and administrative expenses *
Selling expense 89,000 94,000 55,000 34,000
Administrative expense 42,000 56,000 34,400 32,000
Total selling and administrative
expenses 131,000 150,000 89,400 66,000
Net operating income $7,000 $147,000 $42,600 $36,000
April May June July
Sales $460,000 $990,000 $440,000 $340,000
Credit sales (80%) 368,000 792,000 352,000 272,000
Cash collections
Cash sales (20%) $92,000 $198,000 $88,000 $68,000
Credit sales:
10% month of sale 36,800 79,200 35,200 27,200
70% month following sale 123,200 257,600 554,400 246,400
20% second month following 25,600 35,200 73,600 158,400
Total cash collections $277,600 $570,000 $751,200 $500,000
April May June July
Cost of goods sold 322,000 693,000 308,000 238,000
Ending inventory (20%) 138,600 61,600 47,600
Goods available for sale 460,600 754,600 355,600
Beginning inventory 64,400 138,600 61,600 47,600
Purchases 396,200 616,000 294,000
Cash payment for purchases:
50% month of purchase 198,100 308,000 147,000
50% month following purchase 93,800 198,100 308,000
Total payment for purchases $291,800 $506,100 $455,000
Other payments:
Dividends 24,000
Land purchase 32,000
Selling & administrative exp. 115,000 134,000 73,400
Total cash payments $430,800 $672,100 $528,400
Principal debt to bank at the end of the quarter = $121,000
+ Interests: 1% of $119,000 = $1,190
1% of $121,000 1,210
Total interest owed $2,400 2,400
Total debt to the bank at the end of the quarter = $123,400
Revised Estimates:
Credit sales (80%) 368,000 792,000 352,000 272,000
Cash collections
Cash sales (20%) $92,000 $198,000 $88,000 $378,000
Credit sales:
25% month of sale 92,000 198,000 88,000 378,000
65% month following sale 114,400 239,200 514,800 868,400
10% second month following 12,800 17,600 36,800 67,200
Total cash collections $311,200 $652,800 $727,600 $1,691,600
April May June July
Cost of goods sold 322,000 693,000 308,000 238,000
Ending inventory (15%) 103,950 46,200 35,700
Goods available for sale 425,950 739,200 343,700
Beginning inventory 84,000 103,950 46,200
Purchases 341,950 635,250 297,500
Cash payment for purchases:
50% month of purchase 170,975 317,625 148,750
50% month following purchase 126,000 170,975 317,625
Total payment for purchases $296,975 $488,600 $466,375
Other payments:
Dividends 24,000
Land purchase 32,000
Selling & administrative exp. 115,000 134,000 73,400
Total cash payments $435,975 $654,600 $539,775