### Financial Planning Exercise#### Expected Net Operating IncomeThe expected net operating income for December is projected to be one of the following amounts:- $42,800- $27,800- $32,000- $52,000#### Expected Cash DisbursementsThe expected cash disbursements in December are:- $153,000- $156,700- $169,960- $189,960#### Scenario: Managing Cash ShortageIn a scenario where management anticipates a cash shortage, the company's cash ending balance for December is forecasted to be negative $4,600. This is significantly below the required minimum level of $30,000. To manage this, the company has the option to borrow from a local bank, with an agreement to borrow in increments of $1,000, up to a maximum total loan balance of $100,000.- **Interest Rate:** 1% per month, payable at the end of each month.**Question:** How much should management borrow from the bank on December 1 to meet the cash requirement?- $36,000- $35,000- $34,950- $34,000This exercise assists in understanding cash flow management and the impact of borrowing strategies in business finance. The following budgeted information is collected for a merchandising company:- **Budgeted sales (all on credit) for November, December, and January** are $250,000, $210,000, and $200,000, respectively.- **Cash collections of sales** are expected to be 75% in the month of sale and 23% in the month following the sale.- **The remainder of the sales** is expected to be uncollectible.- **The cost of goods sold** is always 65% of sales.- **Each month’s ending inventory** equals 20% of next month’s cost of goods sold.- **40% of each month’s merchandise purchases** are paid in the current month and the remainder is paid in the following month.- **Monthly selling and administrative expenses** that are paid in cash in the month incurred total $21,500.- **Monthly depreciation expense** is $20,000.- **Dividends of $5,000** to be declared in December and paid in January.Use the above information to answer the following **FIVE** questions.The expected cash collections from customers in December are:- ○ $210,000- ○ $250,000- ○ $220,000- ○ $215,000The ending balance of Accounts Payable for December is:- ○ $81,120- ○ $94,380- ○ $135,200- ○ $54,080

"Since you have posted a question with multiple sub parts, we will solve first three sub parts for you. To get remaining sub parts solved please repost the complete question and mention the sub parts to be solved." The budget is prepared to estimate the requirements for the future period. Part a. Cash collection schedule (December) Collection from November sales (250,000 * 23%) $57,500 Collection from December sales (210,000 * 75%) $157,500 Total cash collection $215,000 Hence, option d. $215,000 is the correct value. Part b. Purchase Budget for December Budgeted cost of goods sold (210,000 * 65%) $136,500 Add: ending inventory (200,000 * 65% * 20%) 26,000 Total $162,500 Less: beginning inventory (210,000 * 65% * 20%) (27,300) Required purchase $135,200 Accounts payable (end of December) = $135,200 * 60% = $81,120 Hence, option a. $81,120 is the correct value. Part c. Income statement (December) Sales $210,000 Less: COGS (65%) (136,500) Gross profit 73,500 Less: expenses Selling and administrative expenses (21,500) Depreciation expense (20,000) Net income $32,000 Hence, option c. $32,000 is correct.

Business

Accounting

• Budgeted sales (all on credit) for November, December, and January are $250,000, $210,000, and $200,000, respectively. • Cash collections of sales are expected to be 75% in the month of sale and 23% in the month following the sale. • The remainder of the sales is expected to be uncollectible. • The cost of goods sold is always 65% of sales. • Each month's ending inventory equals 20% of next month's cost of goods sold. • 40% of each month's merchandise purchases are paid in the current month and the remainder is paid in the following month • Monthly selling and administrative expenses that are paid in cash in the month incurred total $21,500. • Monthly depreciation expense is $20,000. • Dividends of $5,000 to be declared in December and paid in Janauary. e the above information to answer the following FIVE questions. e expected cash collections from customers in December are: O $210,000 $250,000 O $220,000 O $215,000 e ending balance of Accounts Payable for December is:

• Budgeted sales (all on credit) for November, December, and January are $250,000, $210,000, and $200,000, respectively. • Cash collections of sales are expected to be 75% in the month of sale and 23% in the month following the sale. • The remainder of the sales is expected to be uncollectible. • The cost of goods sold is always 65% of sales. • Each month's ending inventory equals 20% of next month's cost of goods sold. • 40% of each month's merchandise purchases are paid in the current month and the remainder is paid in the following month • Monthly selling and administrative expenses that are paid in cash in the month incurred total $21,500. • Monthly depreciation expense is $20,000. • Dividends of $5,000 to be declared in December and paid in Janauary. e the above information to answer the following FIVE questions. e expected cash collections from customers in December are: O $210,000 $250,000 O $220,000 O $215,000 e ending balance of Accounts Payable for December is:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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