189 Exercise 5-11 William Go is the owner and manager of the Kentucky Company. He is in the process of preparing a budget for the first six months of 2021, Income statement estimates for each month are given below: Sales Cost of sales Expenses Depreciation Total Net income Jan. Feb. March April May June 22,000 24,000 28,000 8,000 10,000 10,000 P92,000 P82,000 P102,000 P146,000 P172,000 P188,000 P50,000 P46,000 P56,000 P68,000 P88,000 P96,000 16,000 14,000 16,000 8,000 8,000 8,000 P74,000 P68,000 P80,000 P98,000 P122,000 P134,000 P18,000 P14,000 P22,000 P48,000 P50,000 P54,000 During the six-month period, William anticipates the following changes in certain balance sheet accounts during each month. (decreases) are given below: The increases and Jan. Feb. March April May June Accounts receivableP(6,000) P4,000 P12,000 P(4,000) P6,000 P(8,000) Inventories Accounts payable 8,000 (8,000) 14,000 0 2,000 (6,000) 0 (10,000) 16,000 2,000 (4,000) (4,000) The cash balance on January 1, 2021 is expected to be P46,000. New equipment costing P86,000 is to be purchased for cash in April. An investment in BSP bonds in the amount of P50,000 is to be made in February. Each month. William plans to withdraw P15,000 for his personal use. REQUIRED: 1. William hopes to have a cash balance of no less than P40,000 at all times. Can this be accomplished without securing a bank loan or obtaining cash from other sources. To answer this prepare a cash budget similar to the one on page 172.
189 Exercise 5-11 William Go is the owner and manager of the Kentucky Company. He is in the process of preparing a budget for the first six months of 2021, Income statement estimates for each month are given below: Sales Cost of sales Expenses Depreciation Total Net income Jan. Feb. March April May June 22,000 24,000 28,000 8,000 10,000 10,000 P92,000 P82,000 P102,000 P146,000 P172,000 P188,000 P50,000 P46,000 P56,000 P68,000 P88,000 P96,000 16,000 14,000 16,000 8,000 8,000 8,000 P74,000 P68,000 P80,000 P98,000 P122,000 P134,000 P18,000 P14,000 P22,000 P48,000 P50,000 P54,000 During the six-month period, William anticipates the following changes in certain balance sheet accounts during each month. (decreases) are given below: The increases and Jan. Feb. March April May June Accounts receivableP(6,000) P4,000 P12,000 P(4,000) P6,000 P(8,000) Inventories Accounts payable 8,000 (8,000) 14,000 0 2,000 (6,000) 0 (10,000) 16,000 2,000 (4,000) (4,000) The cash balance on January 1, 2021 is expected to be P46,000. New equipment costing P86,000 is to be purchased for cash in April. An investment in BSP bonds in the amount of P50,000 is to be made in February. Each month. William plans to withdraw P15,000 for his personal use. REQUIRED: 1. William hopes to have a cash balance of no less than P40,000 at all times. Can this be accomplished without securing a bank loan or obtaining cash from other sources. To answer this prepare a cash budget similar to the one on page 172.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
Transcribed Image Text:190
Kentucky Company
Cash Budget
For the First Six Months of 2021
Jan.
Feb.
Mar.
April
May
June
Cash balance, beginning
Add: Cash receipts
Collection of accounts (Sch. 1)
Totals
Less: Cash payments
Accounts payable (Sch. 2 & 3)
Expenses
Purchase of equipment
Purchase of bond investment
Withdrawal for personal use
Totals
Cash balance, ending
Less: Excess cash on hand
Add: New borrowings
Cash balance, ending
Cumulative investments
Cumulative borrowings
Transcribed Image Text:189
Exercise 5-11
William Go is the owner and manager of the Kentucky Company. He is
in the process of preparing a budget for the first six months of 2021, Income
statement estimates for each month are given below:
Jan.
Feb.
May
March
P92,000 P82,000 P102,000 P146,000 P172,000 P188,000
P50,000 P46,000 P56,000 P68,000 P88,000
April
June
Sales
Cost of sales
P96,000
28,000
Expenses
Depreciation
Total
16,000
8,000
P74,000 P68,000 P80,000
P18,000 P14,000
14,000
8,000
16,000
8,000
24,000
10,000
P98,000 P122,000 P134,000
22,000
8,000
10,000
Net income
P22,000 P48,000 P50,000
P54,000
in certain balance sheet accounts during each month.
(decreases) are given below:
During the six-month period, William anticipates the following changes
The increases and
March
Accounts receivableP(6,000) P4,000 P12,000
Jan.
Feb.
May
P(4,000) P6,000 P(8,000)
(10,000) 16,000
(4,000) (4,600)
April
June
Inventories
8,000
(8,000)
14,000
(6,000 )
Accounts payable
2,000
2,000
The cash balance on January 1, 2021 is expected to be P46,000. New
equipment costing P86,000 is to be purchased for cash in April. An investment
in BSP bonds in the amount of P50,000 is to be made in February. Each month,
William plans to withdraw Pl15,000 for his personal use.
REQUIRED:
1. William hopes to have a cash balance of no less than P40,000 at all times.
Can this be accomplished without securing a bank loan or obtaining cash
from other sources. To answer this prepare a cash budget similar to the one
on page 172.
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