This is my fifth and final time... Can someone please provide me the FORMULAS, A
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Question
This is my fifth and final time... Can someone please provide me the FORMULAS, ANSWERS, AND QUARTER TOTALS FOR THIS SECTION... IT'S NOT THAT HARD TO COMPREHEND.. PLEASE I NEED IT ASAP!!!
Need the Quarter calculations also in this section.... It was not provided to me the last three times that I requested it!!
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 LBJ Company, a distributor of bracelets to various retail outlets across the country. The company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash.
You have decided to prepare a cash budget for the upcoming fourth quarter in order to show management the benefits that can be gained from proper cash planning. You have worked with accounting and other areas to gather the information assembled below.
The company sells many styles of bracelets, but all are sold for the same $10 price. Actual sales of bracelets for the last three months 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 the Christmas holiday. Sufficient inventory should be on hand at the end of each month to supply 40% of the bracelets sold in the following month.
Suppliers are paid $4 for each bracelet. Fifty-percent of a month's purchases is paid for in the month of purchase; the other 50% is paid for in the following month. All sales are on credit with no discounts. The company has found, however, that only 20% of a month's sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.
Monthly operating expenses for the company are given below:
Variable expenses:
Sales commissions 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 each year.
The company plans to purchase $22,000 in new equipment during October and $50,000 in new equipment during November; both purchases will be for cash. The company declares dividends of $20,000 each quarter, payable in the first month of the following quarter.
Other relevant data is given below:
Cash balance as of September 30 $74,000
Inventory balance as of September 30 $112,000
Merchandise purchases for September $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 the beginning of a month; any repayments are made at the end of a month.
The company has an agreement with a bank that allows the company to borrow the exact amount needed at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company will pay the bank all of the accrued interest on the loan and as much of the loan as possible while still retaining at least $50,000 in cash.
Required:
Prepare a cash budget for the three-month period ending December 31. Include the following detailed budgets:
1.
a. A sales budget, by month and in total.
b. A schedule of expected cash collections from sales, by month and in total.
c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total.
d. A schedule of expected cash disbursements for merchandise purchases, by month and in total.
2. A cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $50,000.
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
Explanation / Answer
Solution:
LBJ Company Budgets for three-month period ending December 31 October November December Quarter Requirement 1a. Sales budget: Budgeted sales in units 70,000 110,000 60,000 240,000 Selling price per unit $10 $10 $10 $10 70,000 X $10 110,000 X $10 60,000 X $10 240,000 X $10 Total sales $700,000 $1,100,000 $600,000 $2,400,000 Requirement 1b. Schedule of expected cash collections: October November December Quarter Total cash collections $446,000 $750,000 $960,000 $2,156,000 Calculation is shown below: The company has found, however, that only 20% of a month's sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Sales Price Sales X Price Sales % Total X % August Collection: August 26,000 $10 $260,000 20% $52,000 July 20,000 $10 $200,000 70% $140,000 June - - Aug Total $192,000 September Collection: September 40,000 $10 $400,000 20% $80,000 Aug 26,000 $10 $260,000 70% $182,000 July 20,000 $10 $200,000 10% $20,000 Sept Total $282,000 Oct Collection Oct 70,000 $10 $700,000 20% $140,000 Sep 40,000 $10 $400,000 70% $280,000 Aug 26,000 $10 $260,000 10% $26,000 Oct Total $446,000 Nov Collection Nov 110,000 $10 $1,100,000 20% $220,000 Oct 70,000 $10 $700,000 70% $490,000 Sep 40,000 $10 $400,000 10% $40,000 Nov Total $750,000 Dec Collection Dec 60,000 $10 $600,000 20% $120,000 Nov 110,000 $10 $1,100,000 70% $770,000 Oct 70,000 $10 $700,000 10% $70,000 Dec Total $960,000 Requirement 1c. Merchandise purchases budget: October November December Quarter Budgeted unit sales 70,000 110,000 60,000 240,000 Add desired ending inventory 40,000 $20,000 $12,000 72,000 Total needs 110,000 130,000 72,000 312,000 Less beginning inventory 26,000 40,000 $20,000 86,000 Required purchases in units 84,000 90,000 52,000 226,000 Unit cost $4 $4 $4 $4 Required dollar purchases $336,000 $360,000 $208,000 $904,000 2. A cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $50,000. LBJ Company Cash Budget for the three-month period ending December 31 October November December Quarter Cash balance, beginning $74,000 $50,000 $50,000 174,000 Add receipts from customers $446,000 $750,000 $960,000 2,156,000 Total cash available $520,000 $800,000 $1,010,000 2,330,000 Less disbursements: Merchandise purchases $200,000 $200,000 $200,000 600,000 Advertising $220,000 $220,000 $220,000 660,000 Rent $20,000 $20,000 $20,000 60,000 Salaries $110,000 $110,000 $110,000 330,000 Commissions (4% of sales) 26000 40000 20000 86,000 Utilities $10,000 $10,000 $10,000 30,000 Equipment purchases $22,000 $50,000 $0 72,000 Dividends paid $20,000 $0 $0 20,000 $628,000 $650,000 $580,000 1,858,000 Excess (deficiency) of receipts over disbursements ($108,000) $150,000 $430,000 472,000 Financing: Borrowings $58,000 $100,000 158,000 Repayments $158,000 158,000 Interest 2880 2,880 Total financing $58,000 $100,000 $160,880 318,880 0 Cash balance, ending $50,000 $50,000 $60,880 160,880Related Questions
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