1. value: 3.33 points Problem 13-54 Budgeted Purchases and Cash Flows (LO 13-4,

Question

1. value: 3.33 points Problem 13-54 Budgeted Purchases and Cash Flows (LO 13-4, 5, 6) Mast Corporation seeks your assistance in developing cash and other budget information for May, June, and July. At April 30, the company had cash of $11,000, accounts receivable of $855,000, inventories of $106,920, and accounts payable of $31,039. 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 2 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: 70 percent within the discount period, 15 percent by the end of the month, and 12 percent by the end of the following month. Three percent is uncollectible.

Explanation / Answer

Solution a:

Solution b:

Solution c:

As billing is done on last day of month, it is assumed that sales of each month is collected by next month with in discount period and without discount period, further balance 12% is collected by following to next month.

Solution d:

Solution e:

Computation of Budgeted Purchases for May - Mast Corporation Particulars Amount Sales units May 9900 Desired ending inventory of May (Units) (12400*120%) 14880 Opening inventory for May (9900*120%) 11880 Budgeted purchases of may (in units) 12900 Cost of inventory per unit $9.00 Budgeted Purchases of inventory for May (In dollar) $116,100.00 Budgeted purchases of selling and administrative expenses ($138600*15% - $3000) $17,790.00 Budgeted Purchases for May $133,890.00

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