Delhi, Inc., seeks your assistance in developing cash and other budget informati
ID: 2462644 • Letter: D
Question
Delhi, Inc., seeks your assistance in developing cash and other budget information for August, September, and October. At July 31, the company had cash of $12,000, accounts receivable of $864,000, inventories of $609,700, and accounts payable of $159,165. The budget is to be based on the following assumptions.
Each month’s sales are billed on the last day of the month.
Customers are allowed a 3 percent discount if payment is made within 10 days after the billing date. Receivables are recorded in the accounts at their gross amounts (not net of discounts).
The billings are collected as follows: 60 percent within the discount period, 25 percent by the end of the month, and 9 percent by the end of the following month. Six percent is uncollectible.
Purchase data are as follows.
Of all purchases of merchandise and selling, general, and administrative expenses, 57 percent is paid in the month purchased and the remainder in the following month.
The number of units in each month’s ending inventory equals 130 percent of the next month’s units of sales.
The cost of each unit of inventory is $10.
Selling, general, and administrative expenses, of which $4,000 is depreciation, equal 15 percent of the current month’s sales.
Actual and projected sales follow:
June
Delhi, Inc., seeks your assistance in developing cash and other budget information for August, September, and October. At July 31, the company had cash of $12,000, accounts receivable of $864,000, inventories of $609,700, and accounts payable of $159,165. The budget is to be based on the following assumptions.
•Each month’s sales are billed on the last day of the month.
•Customers are allowed a 3 percent discount if payment is made within 10 days after the billing date. Receivables are recorded in the accounts at their gross amounts (not net of discounts).
•The billings are collected as follows: 60 percent within the discount period, 25 percent by the end of the month, and 9 percent by the end of the following month. Six percent is uncollectible.
Purchase data are as follows.
•Of all purchases of merchandise and selling, general, and administrative expenses, 57 percent is paid in the month purchased and the remainder in the following month.
•The number of units in each month’s ending inventory equals 130 percent of the next month’s units of sales.
•The cost of each unit of inventory is $10.
•Selling, general, and administrative expenses, of which $4,000 is depreciation, equal 15 percent of the current month’s sales.
•Actual and projected sales follow:
June
$ 720,000 48,000 July 739,500 49,300 August 703,500 46,900 September 679,500 45,300 October 712,500 47,500 November 744,000 49,600 (a) Compute the Budgeted purchases in dollars for August. (b) Compute the Budgeted purchases in dollars for September. (c) Compute the Budgeted cash collections during August. (Round your intermediate calculations and final answer to nearest dollar amount.) (d) Compute the Budgeted cash disbursements during September. (Round your intermediate calculations and final answer to nearest dollar amount.) (e) Compute the budgeted number of units of inventory to be purchased during OctoberExplanation / Answer
Answer: a)
Budgeted ending inventory for august = 45300*1.3 = 58890
Cost of ending inventory = 58890*$10 = 588900
Cost of goods sold in august = 46900*$10 = 469000
Required available inventory = 588900+469000 = 1057900
Budgeted beginning inventory for august = 46900*1.3= 60970
cost of beginning inventory = 60970*$10 = 609700
Required purchases in dollars for august = 1057900-609700= $448200
Answer: b)
Budgeted ending inventory for september = 47500*1.3 = 61750
Cost of ending inventory = 61750*$10 = 617500
Cost of goods sold in september = 45300*$10 = 453000
Required available inventory = 617500+453000 = 1070500
Budgeted beginning inventory for september = 45300*1.3= 58890
cost of beginning inventory = 58890*$10 = 588900
Required purchases in dollars for september = 1070500-588900= $481600
Answer:c)
Discount period (july paid in august) = 739500*60% = 443700
Amount with discount = [443700 - (443700*3%)] = 430389
End of month (july paid in august) = 739500*25% = 184875
End of next month (june paid in august) = 720000*9% = 64800
Total collectible for august = $680064
Answer: d)
Merchandise payment for august purchases = 448200*0.43 = 192726
Selling, general and administrative expenses for august = (703,500*0.15) - 4000 of dep. = 101525
Payment made for Selling, general and administrative expenses for august = 101525*0.43 = 43656
Merchandise payment for september purchases = 481600*0.57 = 274512
Selling, general and administrative expenses for september = (679,500*0.15) - 4000 of dep. = 97925
Payment made for Selling, general and administrative expenses for september = 97925*0.57 = 55817
Total budgeted cash disbursement in september = 192726+43656+274512+55817 = $566711
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