2. The following information has been assembled to assist in preparing a cash budget for the quarter: i. Budgeted monthly income statements for July-October are as follows: September 6,00,000 3,50,000 2,50,000 July 7,00,000 4,20,000 2,80,000 August 10,00,000 6,30,000 370,000 October 5,00,000 2,80,000 2,20,000 Sales Cost of goods sold Gross Margin Less Operating Expenses Selling expense Administrative expense Total expenses 62,000 41,000 1,03,000 147,000 79,000 45,000 1,24,000 120,000 52,000 1,72,000 198,000 51,000 38,000 89,000 131,000 Net Income * includes 28,000 depreciation each month. Sales are 30% for cash and 70% on credit. 156,000 ii. iii. Credit sales are collected over a three month period with 25% collected in the month of sale, 60% collected in the month following sale and 15% in the second month following sale. May sales totaled tk. 210,000 and June sales totaled tk. 400,000. Inventory purchases are paid for within 15 days. Therefore, 70% of a month's inventory purchases are paid for in the month of purchase. The remaining 30% is paid in the following month. Accounts payable for inventory purchases at June 30 total 1,35,000. The company maintains its ending inventory levels at 20% of the cost of the merchandise to be sold in the following month. The merchandise inventory at June 30 is 84,000. vi. iv. Land costing tk. 25,000 will be purchased in August. vii. Dividends of tk. 50,000 will be declared and paid in July. viii. The cash balance on June 30 is tk 60,000; the company must maintain a cash balance of at least 25,000 at the end of the month. ix. The company can borrow from its bank as needed to cash account. Borrowings and repayments must be in multiples of 1,000. All borrowings take place at the beginning of a month and all repayments are made at the end of the month. The annual interest rate is 12%. Compute the interest on whole months. (1/12, 2/12, and so on.) Required: Prepare a cash Budget for the third quarter, by the month as well as for the quarter in total.
2. The following information has been assembled to assist in preparing a cash budget for the quarter: i. Budgeted monthly income statements for July-October are as follows: September 6,00,000 3,50,000 2,50,000 July 7,00,000 4,20,000 2,80,000 August 10,00,000 6,30,000 370,000 October 5,00,000 2,80,000 2,20,000 Sales Cost of goods sold Gross Margin Less Operating Expenses Selling expense Administrative expense Total expenses 62,000 41,000 1,03,000 147,000 79,000 45,000 1,24,000 120,000 52,000 1,72,000 198,000 51,000 38,000 89,000 131,000 Net Income * includes 28,000 depreciation each month. Sales are 30% for cash and 70% on credit. 156,000 ii. iii. Credit sales are collected over a three month period with 25% collected in the month of sale, 60% collected in the month following sale and 15% in the second month following sale. May sales totaled tk. 210,000 and June sales totaled tk. 400,000. Inventory purchases are paid for within 15 days. Therefore, 70% of a month's inventory purchases are paid for in the month of purchase. The remaining 30% is paid in the following month. Accounts payable for inventory purchases at June 30 total 1,35,000. The company maintains its ending inventory levels at 20% of the cost of the merchandise to be sold in the following month. The merchandise inventory at June 30 is 84,000. vi. iv. Land costing tk. 25,000 will be purchased in August. vii. Dividends of tk. 50,000 will be declared and paid in July. viii. The cash balance on June 30 is tk 60,000; the company must maintain a cash balance of at least 25,000 at the end of the month. ix. The company can borrow from its bank as needed to cash account. Borrowings and repayments must be in multiples of 1,000. All borrowings take place at the beginning of a month and all repayments are made at the end of the month. The annual interest rate is 12%. Compute the interest on whole months. (1/12, 2/12, and so on.) Required: Prepare a cash Budget for the third quarter, by the month as well as for the quarter in total.
Chapter4: Financial Planning And Forecasting
Section: Chapter Questions
Problem 4P
Related questions
Concept explainers
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:2. The following information has been assembled to assist in preparing a cash budget for the
quarter:
Budgeted monthly income statements for July -October are as follows:
September
6,00,000
3,50,000
2,50,000
i.
July
7,00,000
August
10,00,000
6,30,000
370,000
October
5,00,000
2,80,000
2,20,000
Sales
Cost of goods sold
4,20,000
Gross Margin
Less Operating Expenses
Selling expense
Administrative expense*
Total expenses
2,80,000
79,000
45,000
1,24,000
156,000
includes 28,000 depreciation each month.
51,000
38,000
89,000
120,000
52,000
62,000
41,000
1,72,000
198,000
1,03,000
Net Income
147,000
131,000
ii.
Sales are 30% for cash and 70% on credit.
iii.
Credit sales are collected over a three month period with 25% collected in the month
of sale, 60% collected in the month following sale and 15% in the second month
following sale. May sales totaled tk. 210,000 and June sales totaled tk. 400,000.
Inventory purchases are paid for within 15 days. Therefore, 70% of a month's inventory
purchases are paid for in the month of purchase. The remaining 30% is paid in the
following month. Accounts payable for inventory purchases at June 30 total 1,35,000.
The company maintains its ending inventory levels at 20% of the cost of the
merchandise to be sold in the following month. The merchandise inventory at Junc 30
is 84,000.
iv.
vi.
Land costing tk. 25,000 will be purchased in August.
Dividends of tk. 50,000 will be declared and paid in July.
viii. The cash balance on June 30 is tk 60,000; the company must maintain a cash balance
vii.
of at least 25,000 at the end of the month.
ix.
The company can borrow from its bank as needed to cash account. Borrowings and
repayments must be in multiples of 1,000. All borrowings take place at the beginning
of a month and all repayments are made at the end of the month. The annual interest
rate is 12%. Compute the interest on whole months. (1/12, 2/12, and so on.)
Required:M
Prepare a cash Budget for the third quarter, by the month as well as for the quarter in total.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College