PROBLEM 9-42
1. Sales budget:
20x0
December
Total sales ........................$800,000
Cash sales*.......................200,000
Sales on account ............600,000
January
$880,000
220,000
660,000
20x1_______________________
February March
First Quarter
$968,000 $1,064,800 $2,912,800
242,000
266,200
728,200
726,000
798,600
2,184,600
*25% of total sales.
75% of total sales.
2. Cash receipts budget:
January
Cash sales .............................. $220,000
Cash collections from credit
sales made during current
month*..........................................66,000
Cash collections from credit
sales made during preceding
month...................................... 540,000
Total cash receipts ............... $826,000
20x1
February March
$242,000 $266,200
First Quarter
$ 728,200
72,600
79,860
218,460
594,000
$908,600
653,400
999,460
1,787,400
$2,734,060
*10% of current month's credit sales.
90% of previous month's credit sales.
3. Purchases budget:
20x0
December January
Budgeted cost of
goods sold ..............
$560,000
Add: Desired
ending inventory.....
308,000
Total goods
needed.....................
$868,000
Less: Expected
beginning
inventory .................
280,000
Purchases..................... $588,000
20x1______________________
February March
First Quarter
$616,000
$677,600
$745,360
$2,038,960
338,800
372,680
372,680*
372,680
954,800
$1,050,280 $1,118,040 $2,411,640
308,000
$646,800
338,800
$711,480
372,680
$745,360
308,000**
$2,103,640
4. Cash disbursements budget:
January
Inventory purchases:
Cash payments for purchases
during the current month*........
$258,720
Cash payments for purchases
during the preceding
month ........................................
352,800
Total cash payments for
inventory purchases .......................$611,520
Other expenses:
Sales salaries................................... $ 42,000
Advertising and promotion ............ 32,000
Administrative salaries................... 42,000
Interest on bonds** ......................... 30,000
Property taxes**............................... -0Sales commissions......................... 8,800
Total cash payments for other
expenses ..........................................$154,800
Total cash disbursements...............$766,320
20x1
February March
First Quarter
$284,592
$298,144
$ 841,456
388,080
426,888
1,167,768
$672,672
$725,032
$2,009,224
$ 42,000
32,000
42,000
-010,800
9,680
$ 42,000
32,000
42,000
-0-010,648
$ 126,000
96,000
126,000
30,000
10,800
29,128
$136,480
$809,152
$126,648
$851,680
$ 417,928
$2,427,152
*40% of current month's purchases [see requirement (3)].
60% of the prior month's purchases [see requirement (3)].
5. Summary cash budget:
20x1
January
February March
First Quarter
$ 826,000 $ 908,600 $ 999,460 2,734,060
Cash receipts [from req. (2)].
Cash disbursements
[from req. (4)] ...................................(766,320)
Change in cash balance
during period due to operations.... $ 59,680
Sale of marketable securities
(1/2/x1) ..............................................30,000
Proceeds from bank loan
(1/2/x1) ..............................................200,000
Purchase of equipment ..................(250,000)
Repayment of bank loan
(3/31/x1) ............................................
Interest on bank loan* ..........................
Payment of dividends...........................
Change in cash balance during
first quarter ......................................
Cash balance, 1/1/x1.............................
Cash balance, 3/31/x1...........................
(809,152)
(851,680)
(2,427,152)
$ 99,448
$147,780
$ 306,908
30,000
200,000
(250,000)
(200,000)
(5,000)
(100,000)
(200,000)
(5,000)
(100,000)
$ (18,092)
70,000
$ 51,908
*$200,000 10% per year 1/4 year = $5,000
6. Analysis of short-term financing needs:
Projected cash balance as of December 31, 20x0....................................... $ 70,000
Less: Minimum cash balance........................................................................ 50,000
Cash available for equipment purchases..................................................... $ 20,000
Projected proceeds from sale of marketable securities............................. 30,000
Cash available................................................................................................. $ 50,000
Less: Cost of investment in equipment........................................................ 250,000
Required short-term borrowing..................................................................... $(200,000)
[Link] ELECTRONICS COMPANY
BUDGETED INCOME STATEMENT
FOR THE FIRST QUARTER OF 20X1
Sales revenue..........................................................................
Less: Cost of goods sold.......................................................
Gross margin...........................................................................
Selling and administrative expenses:
Sales salaries.....................................................................
Sales commissions ...........................................................
Advertising and promotion ..............................................
Administrative salaries.....................................................
Depreciation.......................................................................
Interest on bonds ..............................................................
Interest on short-term bank loan .....................................
Property taxes....................................................................
Total selling and administrative expenses ..........................
Net income...............................................................................
$2,912,800
2,038,960
$ 873,840
$126,000
29,128
96,000
126,000
150,000
15,000
5,000
5,400
552,528
$ 321,312
[Link] ELECTRONICS COMPANY
BUDGETED STATEMENT OF RETAINED EARNINGS
FOR THE FIRST QUARTER OF 20X1
Retained earnings, 12/31/x0.......................................................................... $ 215,000
Add: Net income ............................................................................................ 321,312
Deduct: Dividends ......................................................................................... 100,000
Retained earnings, 3/31/x1............................................................................ $ 436,312
[Link] ELECTRONICS COMPANY
BUDGETED BALANCE SHEET
MARCH 31, 20X1
Cash............................................................................................................... $ 51,908
Accounts receivable*......................................................................................718,740
Inventory......................................................................................................... 372,680
Buildings and equipment (net of accumulated depreciation).................1,352,000
Total assets ............................................................................................... $2,495,328
Accounts payable**......................................................................................$ 447,216
Bond interest payable .................................................................................... 10,000
Property taxes payable................................................................................... 1,800
Bonds payable (10%; due in 20x6)................................................................ 600,000
Common Stock..............................................................................................1,000,000
Retained earnings........................................................................................... 436,312
Total liabilities and stockholders' equity...................................................$2,495,328
*Accounts receivable, 12/31/x0...................................................................... 540,000
Sales on account [req. (1)] ...........................................................................2,184,600
Total cash collections from credit sales
[(req. (2)] ($218,460 + $1,787,400).............................................................. (2,005,860)
Accounts receivable, 3/31/x1.......................................................................$ 718,740
Buildings
and equipment (net), 12/31/x0.................................................$1,252,000
Cost of equipment acquired .......................................................................... 250,000
Depreciation expense for first quarter..........................................................(150,000)
Buildings and equipment (net), 3/31/x1 ................................................... $1,352,000
**Accounts payable, 12/31/x0 ......................................................................$ 352,800
Purchases [req. (3)].......................................................................................2,103,640
Cash payments for purchases [req. (4)] ...................................................(2,009,224)
Accounts payable, 3/31/x1 ...........................................................................$ 447,216