Answer:
Nadia Company
1. Schedule of expected cash receipts from customers :
April May June
Cash 20% $52,500 $55,125 $57,880
Credit 80% 48,000 210,000 220,500
Total receipts $100,500 $265,125 $278,380
2. Schedule of expected cash payments for purchases :
Payment for purchases: April May June
50% (month of purchase) $81,900 $85,995 $90,293
50% (following month) 18,300 81,900 85,995
Total cash payment $100,300 $167,895 $176,288
3. Statement of Cash budget for the second quarter ended June 30:
April May June Total
Beginning cash balance $9,000 ($58,363) ($23,649) $9,000
Cash receipts from customer 100,500 265,125 278,380 644,005
Total cash available $109,500 $206,762 $254,731 $653,005
Cash payments:
Purchases $100,300 $167,895 $176,288 $444,483
Selling & Administrative 76,063 79,516 82,615 238,194
Equipment purchase 11,500 3,000 14,500
Dividends 3,500 3,500
Total cash payments: $187,863 $250,411 $262,403 $700,677
Cash shortfall ($78,363) ($43,649) ($7,672)
Bank overdraft 20,000 20,000 16,000 56,000
Cash balance ($58,363) ($23,649) $8,328 $8,328
Explanation:
a) Data:
Nadia Balance Sheet as of March 31:
Cash $9,000
Acct Receivable 48,000
Inventory 12,6000
Buildings & Equip. (net) 214,100
Total $283,700
Acct. Payable $18,300
Common Stock 190,000
Retained Earnings 75,400
Total $283,700
b) Sales:
Month Quantity Unit Price Total
March 10,000 units $25.00 $250,000
April = 10,500 (10,000 x 1.05) " $262,500
May = 11,025 (10,500 x 1.05) " $275,625
June = 11,576 (11,025 x 1.05) " $289,400
July = 12,155 (11,576 x 1.05) " $303,875
c) Sales Terms:
March April May June
Cash 20% $52,500 $55,125 $57,880
Credit 80% 48,000 210,000 220,500
d) Inventory:
March April May June
8,400 8,820 9,261 9,724
Ending $126,000 $132,300 $138,915 $145,860
Beginning $126,000 $132,000 $138,915
e) Selling & Administrative Expenses
April May June Total
Salaries and wages $7,500 $7,500 $7,500 $22,500
Shipping 15,750 16,538 17,364 49,652
Advertising 6,000 6,000 6,000 18,000
Others 10,500 11,025 11,576 33,101
Depreciation 6,000
Sales commissions 32,813 34,453 36,175 104,441
Sales Manager's Salary 3,500 4,000 4,000 11,500
Total $76,063 $79,516 $82,615
f) Purchases of Inventory
April May June Total
Ending Inventory 8,820 9,261 9,724
Units of Inventory sold 10,500 11,025 11,576
Inventory available for sale 19,320 20,286 21,300
less beginning inventory 8,400 8,820 9,261
Purchases 10,920 11,466 12,039
Cost of purchases x $15 $163,800 $171,990 $180,585
Payment for purchases: April May June
50% (month of purchase) $81,900 $85,995 $90,293
50% (following month) 18,300 81,900 85,995
Total cash payment $100,300 $167,895 $176,288
g) April May June
Equipment purchase $11,500 $3,000
h) Nadia Company's preparation of quarter budgets helps it to foresee cash shortages and make necessary arrangements to meet up with cash obligations. It focuses management efforts to achieve sales and deliver on other perimeters, including the control of expenses. It is important for the master budget to be prepared with inputs from other subsidiary budgets so that management plans ahead.