Delhi, Inc., seeks your assistance in developing cash and other budget informati
ID: 2463765 • 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 $10,000, accounts receivable of $874,000, inventories of $692,120, and accounts payable of $178,586. 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: 65 percent within the discount period, 20 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 $11. • 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: Dollars Units June $ 742,400 46,400 July 764,800 47,800 August 774,400 48,400 September 731,200 45,700 October 772,800 48,300 November 795,200 49,700 Required: (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 October.
Explanation / Answer
a. $493,790
BB + P
=
Sales + EB
(130% *48,400) + P
=
48,400 + (130% * 45,700)
62,920 + P
=
48,400 + 59,410
P
=
48,400 + 59,410 – 62,920
=
44,890 units
44,890 * $11
=
$493,790
b. $539,880
BB + P
=
Sales + EB
(130% * 45,700) + P
=
45,700 + (130% * 48,300)
59,410 + P
=
45,700 + 62,790
P
=
45,700 + 62,790 – 59,410
=
49,080 units
49,080 * $11
=
$539,880
c. $701,982
65%
*
$764,800
*
97%
=
$482,206
20%
*
$764,800
=
152,960
9%
*
$742,400
=
66,816
$701,982
d. $628,527 September cash disbursement
August purchases paid in September: $493,790 * 43% = $212,329
August selling general and administrative expenses paid in September:
[($774,400 * 15%) – $4,000] * 43% = $48,228
September purchases paid in September:
$539,880 * 57% = $307,732
September selling, general and administrative expenses paid in September:
[($731,200 * 15%) – $4,000] * 57% = $60,238
$212,329 + $48,228 + $307,732+ $60,238 = $628,527
e. 50,120 units
BB + P
=
Sales + EB
(130% * 48,300) + P
=
48,300 + (130% * 49,700)
P
=
48,300 + 64,610 – 62,790
=
50,120
units
BB + P
=
Sales + EB
(130% *48,400) + P
=
48,400 + (130% * 45,700)
62,920 + P
=
48,400 + 59,410
P
=
48,400 + 59,410 – 62,920
=
44,890 units
44,890 * $11
=
$493,790
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