Cash Budget, Pro Forma Balance Sheet Bernard Creighton is the controller for Creighton Hardware Store. In putting together the cash budget for the fourth quarter of the year, he has assembled the following data. Sales July (actual) $100,000 August (actual) 120,000 September (estimated) 90,000 October (estimated) 100,000 November (estimated) 135,000 December (estimated) 150,000 Each month, 20 percent of sales are for cash, and 80 percent are on credit. The collection pattern for credit sales is 20 percent in the month of sale, 50 percent in the following month, and 30 percent in the second month following the sale. Each month, the ending inventory exactly equals 40 percent of the cost of next month's sales. The markup on goods is 33.33 percent of cost. Inventory purchases are paid for in the month following purchase. Recurring monthly expenses are as follows: Salaries and wages $10,000 Depreciation on plant and equipment 4,000 Utilities 1,000 Other 1,700 Property taxes of $15,000 are due and payable on September 15. Advertising fees of $6,000 must be paid on October 20. A lease on a new storage facility is scheduled to begin on November 2. Monthly payments are $5,000. The company has a policy to maintain a minimum cash balance of $10,000. If necessary, it will borrow to meet its short-term needs. All borrowing is done at the beginning of the month. All payments on principal and interest are made at the end of the month. The annual interest rate is 9 percent. The company must borrow in multiples of $1,000. A partially completed balance sheet as of August 31 is given below. (Accounts payable is for inventory purchases only.) Assets Liabilities & Owners’ Equity Cash $ ? Accounts receivable ? Inventory ? Plant and equipment 431,750 Accounts payable $ ? Common stock 220,000 Retained earnings 268,750 Totals $ ? $ ? Required: 1. Complete the balance sheet given in part (j). Creighton Hardware Store Balance Sheet August 31 Assets Liabilities & Owners' Equity Cash $fill in the blank Accounts receivable fill in the blank Inventory fill in the blank Plant and equipment 431,750 Accounts payable $fill in the blank Common stock 220,000 Retained earnings 268,750 Totals $fill in the blank $fill in the blank 2. Bernard wants to see how the company is doing prior to starting the month of December. Prepare a cash budget for the months of September, October, and November and for the three-month period in total (the period begins on September 1). Enter repayments, interest, cash deficiencies and negative total financing as negative amounts. If amount is zero, enter "0". Creighton Hardware Store Cash Budget For the Period Ending November 30 September October November Total Beginning cash balance $fill in the blank $fill in the blank $fill in the blank $fill in the blank cash collection Total cash available Disbursements: Accounts payable Salaries and wages Utilities fill in the blank fill in the blank fill in the blank Other fill in the blank fill in the blank fill in the blank fill in the blank Property taxes fill in the blank fill in the blank Advertising fees fill in the blank fill in the blank Lease fill in the blank fill in the blank Total disbursements $fill in the blank $fill in the blank $fill in the blank $fill in the blank Minimum cash balance fill in the blank fill in the blank fill in the blank fill in the blank Total cash needs $fill in the blank $fill in the blank $fill in the blank $fill in the blank Excess (deficiency) $fill in the blank $fill in the blank $fill in the blank $fill in the blank Financing: Borrowings $fill in the blank $fill in the blank Repayments $fill in the blank fill in the blank Interest fill in the blank fill in the blank Total financing $fill in the blank $fill in the blank fill in the blank $fill in the blank Ending cash balance $fill in the blank $fill in the blank $fill in the blank $fill in the blank Complete a supporting schedule of cash collections. Creighton Hardware Store Cash collections For the Period Ending November 30 September October November Total Cash sales $fill in the blank $fill in the blank $fill in the blank $fill in the blank Credit sales: Current month fill in the blank fill in the blank fill in the blank fill in the blank Prior month fill in the blank fill in the blank fill in the blank fill in the blank From two months ago fill in the blank fill in the blank fill in the blank fill in the blank Total collections $fill in the blank $fill in the blank $fill in the blank $fill in the blank 3. Prepare a pro forma balance sheet as of November 30. Creighton Hardware Store Pro Forma Balance Sheet November 30 Assets: $fill in the blank fill in the blank fill in the blank fill in the blank Liabilities: $fill in the blank Owners' Equity: fill in the blank fill in the blank Totals $fill in the blank $fill in the blank

Cash Budget, Pro Forma Balance Sheet Bernard Creighton is the controller for Creighton Hardware Store. In putting together the cash budget for the fourth quarter of the year, he has assembled the following data. Sales July (actual) $100,000 August (actual) 120,000 September (estimated) 90,000 October (estimated) 100,000 November (estimated) 135,000 December (estimated) 150,000 Each month, 20 percent of sales are for cash, and 80 percent are on credit. The collection pattern for credit sales is 20 percent in the month of sale, 50 percent in the following month, and 30 percent in the second month following the sale. Each month, the ending inventory exactly equals 40 percent of the cost of next month's sales. The markup on goods is 33.33 percent of cost. Inventory purchases are paid for in the month following purchase. Recurring monthly expenses are as follows: Salaries and wages $10,000 Depreciation on plant and equipment 4,000 Utilities 1,000 Other 1,700 Property taxes of $15,000 are due and payable on September 15. Advertising fees of $6,000 must be paid on October 20. A lease on a new storage facility is scheduled to begin on November 2. Monthly payments are $5,000. The company has a policy to maintain a minimum cash balance of $10,000. If necessary, it will borrow to meet its short-term needs. All borrowing is done at the beginning of the month. All payments on principal and interest are made at the end of the month. The annual interest rate is 9 percent. The company must borrow in multiples of $1,000. A partially completed balance sheet as of August 31 is given below. (Accounts payable is for inventory purchases only.) Assets Liabilities & Owners’ Equity Cash $ ? Accounts receivable ? Inventory ? Plant and equipment 431,750 Accounts payable $ ? Common stock 220,000 Retained earnings 268,750 Totals $ ? $ ? Required: 1. Complete the balance sheet given in part (j). Creighton Hardware Store Balance Sheet August 31 Assets Liabilities & Owners' Equity Cash $fill in the blank Accounts receivable fill in the blank Inventory fill in the blank Plant and equipment 431,750 Accounts payable $fill in the blank Common stock 220,000 Retained earnings 268,750 Totals $fill in the blank $fill in the blank 2. Bernard wants to see how the company is doing prior to starting the month of December. Prepare a cash budget for the months of September, October, and November and for the three-month period in total (the period begins on September 1). Enter repayments, interest, cash deficiencies and negative total financing as negative amounts. If amount is zero, enter "0". Creighton Hardware Store Cash Budget For the Period Ending November 30 September October November Total Beginning cash balance $fill in the blank $fill in the blank $fill in the blank $fill in the blank cash collection Total cash available Disbursements: Accounts payable Salaries and wages Utilities fill in the blank fill in the blank fill in the blank Other fill in the blank fill in the blank fill in the blank fill in the blank Property taxes fill in the blank fill in the blank Advertising fees fill in the blank fill in the blank Lease fill in the blank fill in the blank Total disbursements $fill in the blank $fill in the blank $fill in the blank $fill in the blank Minimum cash balance fill in the blank fill in the blank fill in the blank fill in the blank Total cash needs $fill in the blank $fill in the blank $fill in the blank $fill in the blank Excess (deficiency) $fill in the blank $fill in the blank $fill in the blank $fill in the blank Financing: Borrowings $fill in the blank $fill in the blank Repayments $fill in the blank fill in the blank Interest fill in the blank fill in the blank Total financing $fill in the blank $fill in the blank fill in the blank $fill in the blank Ending cash balance $fill in the blank $fill in the blank $fill in the blank $fill in the blank Complete a supporting schedule of cash collections. Creighton Hardware Store Cash collections For the Period Ending November 30 September October November Total Cash sales $fill in the blank $fill in the blank $fill in the blank $fill in the blank Credit sales: Current month fill in the blank fill in the blank fill in the blank fill in the blank Prior month fill in the blank fill in the blank fill in the blank fill in the blank From two months ago fill in the blank fill in the blank fill in the blank fill in the blank Total collections $fill in the blank $fill in the blank $fill in the blank $fill in the blank 3. Prepare a pro forma balance sheet as of November 30. Creighton Hardware Store Pro Forma Balance Sheet November 30 Assets: $fill in the blank fill in the blank fill in the blank fill in the blank Liabilities: $fill in the blank Owners' Equity: fill in the blank fill in the blank Totals $fill in the blank $fill in the blank

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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Cash Budget, Pro Forma Balance Sheet

Bernard Creighton is the controller for Creighton Hardware Store. In putting together the cash budget for the fourth quarter of the year, he has assembled the following data.

Sales

July (actual)	$100,000
August (actual)	120,000
September (estimated)	90,000
October (estimated)	100,000
November (estimated)	135,000
December (estimated)	150,000

Each month, 20 percent of sales are for cash, and 80 percent are on credit. The collection pattern for credit sales is 20 percent in the month of sale, 50 percent in the following month, and 30 percent in the second month following the sale.
Each month, the ending inventory exactly equals 40 percent of the cost of next month's sales. The markup on goods is 33.33 percent of cost.
Inventory purchases are paid for in the month following purchase.
Recurring monthly expenses are as follows:

Salaries and wages $10,000

Depreciation on plant and equipment 4,000

Utilities 1,000

Other 1,700
Property taxes of $15,000 are due and payable on September 15.
Advertising fees of $6,000 must be paid on October 20.
A lease on a new storage facility is scheduled to begin on November 2. Monthly payments are $5,000.
The company has a policy to maintain a minimum cash balance of $10,000. If necessary, it will borrow to meet its short-term needs. All borrowing is done at the beginning of the month. All payments on principal and interest are made at the end of the month. The annual interest rate is 9 percent. The company must borrow in multiples of $1,000.

A partially completed balance sheet as of August 31 is given below. (Accounts payable is for inventory purchases only.)

	Assets	Liabilities & Owners’ Equity
Cash	$ ?
Accounts receivable	?
Inventory	?
Plant and equipment	431,750
Accounts payable		$ ?
Common stock		220,000
Retained earnings		268,750
Totals	$ ?	$ ?

Required:

1. Complete the balance sheet given in part (j).

Creighton Hardware Store
Balance Sheet
August 31
	Assets	Liabilities & Owners' Equity
Cash	$fill in the blank
Accounts receivable	fill in the blank
Inventory	fill in the blank
Plant and equipment	431,750
Accounts payable		$fill in the blank
Common stock		220,000
Retained earnings		268,750
Totals	$fill in the blank	$fill in the blank

2. Bernard wants to see how the company is doing prior to starting the month of December. Prepare a cash budget for the months of September, October, and November and for the three-month period in total (the period begins on September 1). Enter repayments, interest, cash deficiencies and negative total financing as negative amounts. If amount is zero, enter "0".

Creighton Hardware Store
Cash Budget
For the Period Ending November 30
	September	October	November	Total
Beginning cash balance	$fill in the blank	$fill in the blank	$fill in the blank	$fill in the blank
cash collection
Total cash available

Disbursements:
Accounts payable
Salaries and wages
Utilities	fill in the blank	fill in the blank	fill in the blank
Other	fill in the blank	fill in the blank	fill in the blank	fill in the blank
Property taxes	fill in the blank			fill in the blank
Advertising fees		fill in the blank		fill in the blank
Lease			fill in the blank	fill in the blank
Total disbursements	$fill in the blank	$fill in the blank	$fill in the blank	$fill in the blank
Minimum cash balance	fill in the blank	fill in the blank	fill in the blank	fill in the blank
Total cash needs	$fill in the blank	$fill in the blank	$fill in the blank	$fill in the blank
Excess (deficiency)	$fill in the blank	$fill in the blank	$fill in the blank	$fill in the blank
Financing:
Borrowings	$fill in the blank			$fill in the blank
Repayments		$fill in the blank		fill in the blank
Interest		fill in the blank		fill in the blank
Total financing	$fill in the blank	$fill in the blank	fill in the blank	$fill in the blank
Ending cash balance	$fill in the blank	$fill in the blank	$fill in the blank	$fill in the blank

Complete a supporting schedule of cash collections.

Creighton Hardware Store
Cash collections
For the Period Ending November 30
	September	October	November	Total
Cash sales	$fill in the blank	$fill in the blank	$fill in the blank	$fill in the blank
Credit sales:
Current month	fill in the blank	fill in the blank	fill in the blank	fill in the blank
Prior month	fill in the blank	fill in the blank	fill in the blank	fill in the blank
From two months ago	fill in the blank	fill in the blank	fill in the blank	fill in the blank
Total collections	$fill in the blank	$fill in the blank	$fill in the blank	$fill in the blank

3. Prepare a pro forma balance sheet as of November 30.

Creighton Hardware Store
Pro Forma Balance Sheet
November 30
Assets:
	$fill in the blank
	fill in the blank
	fill in the blank
	fill in the blank
Liabilities:
		$fill in the blank
Owners' Equity:
		fill in the blank
		fill in the blank
Totals	$fill in the blank	$fill in the blank

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Salaries and wages	$10,000
Depreciation on plant and equipment	4,000
Utilities	1,000
Other	1,700