1. The following information is budgeted for McCracken Plumbing Supply Corporation for next quarter. April May June Sales 110,000 130,000 180,000 Merchandise Purchases 85,000 92,000 105,000 Selling and Administrative Expenses 50,000 50,000 50,000 All sales at McCracken are on credit. Forty percent are collected in the month of sale, 58% in the month following the sale, and the remaining 2% are uncollectable. Merchandise purchases are paid in full the month following the month of purchase. The selling and administrative expenses above include $8,000 of depreciation on display fixtures and warehouse equipment. All other selling and administrative expenses are paid as incurred. McCracken wants to maintain a cash balance of $15,000. Any amount below this can be borrowed from a local bank as needed in increments of $1,000 at a 12% annual interest rate. All borrowings are made at the beginning of the month so interest expense will need to be accrued. McCracken expects to have $24,000 of cash on hand at the beginning of May. Prepare McCracken’s cash budget for May and June. (Interest is calculated principle x rate x time). When feasible, loans are repaid at the end of the month so interest expense will also need to be recorded. Please Answer With A Step By Step Solutions

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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1. The following information is budgeted for McCracken Plumbing Supply Corporation for next quarter.

                                                                   April               May                 June

Sales                                                        110,000         130,000           180,000
Merchandise Purchases                           85,000          92,000              105,000

Selling and Administrative Expenses       50,000           50,000             50,000

 

 

All sales at McCracken are on credit. Forty percent are collected in the month of sale, 58% in the month following the sale, and the remaining 2% are uncollectable. Merchandise purchases are paid in full the month following the month of purchase. The selling and administrative expenses above include $8,000 of depreciation on display fixtures and warehouse equipment. All other selling and administrative expenses are paid as incurred. McCracken wants to maintain a cash balance of $15,000. Any amount below this can be borrowed from a local bank as needed in increments of $1,000 at a 12% annual interest rate. All borrowings are made at the beginning of the month so interest expense will need to be accrued. McCracken expects to have $24,000 of cash on hand at the beginning of May. Prepare McCracken’s cash budget for May and June. (Interest is calculated principle x rate x time). When feasible, loans are repaid at the end of the month so interest expense will also need to be recorded.

 

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