Corning Incorporated sells its product for $24 per unit.  Its actual and projected sales follow:     Units Dollars January (actual) 18,500 $444,000 February (actual) 23,000    552,000 March (budgeted) 19,800    475,200 April (budgeted) 18,950    454,800 May (budgeted) 22,000    528,000   Here is added information about Corning’s operations:   All sales are on credit.  Recent experience show that 35% of sales are collected in the month of the sale, 45% in the month following the sale, 17% in the second month after the sale, and 3% prove to be uncollectible.  The product’s purchase price is $15 per unit.  All payments are payable within 21 days.  Thus 30% of purchases in any given month are paid for in that month, with the remaining 70% paid for in the following month.  The company has a policy to maintain an ending inventory of 20% of the next month’s projected sales plus a safety stock of 100 units.  The January 31 and February 28 actual inventory levels are consistent with this policy.  Selling and administrative expenses for the year are $2,456,000 and are paid evenly throughout the year in cash.  The company’s minimum cash balance at month-end is $50,000.  This minimum is maintained, if necessary, by borrowing cash from the bank.  If the balance exceeds $50,000, the company repays as much of the loan balance as it can without going below the minimum.  This loan carries an annual interest rate of 6% (0.5% per month).  At February 28, the loan balance is $14,000, and the company’s cash balance is $50,000. In excel prepare a table showing the computation of cash payments on merchandise purchases for March and April.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Corning Incorporated sells its product for $24 per unit.  Its actual and projected sales follow:

 

 

Units

Dollars

January (actual)

18,500

$444,000

February (actual)

23,000

   552,000

March (budgeted)

19,800

   475,200

April (budgeted)

18,950

   454,800

May (budgeted)

22,000

   528,000

 

Here is added information about Corning’s operations:

 

All sales are on credit.  Recent experience show that 35% of sales are collected in the month of the sale, 45% in the month following the sale, 17% in the second month after the sale, and 3% prove to be uncollectible.  The product’s purchase price is $15 per unit.  All payments are payable within 21 days.  Thus 30% of purchases in any given month are paid for in that month, with the remaining 70% paid for in the following month.  The company has a policy to maintain an ending inventory of 20% of the next month’s projected sales plus a safety stock of 100 units.  The January 31 and February 28 actual inventory levels are consistent with this policy.  Selling and administrative expenses for the year are $2,456,000 and are paid evenly throughout the year in cash.  The company’s minimum cash balance at month-end is $50,000.  This minimum is maintained, if necessary, by borrowing cash from the bank.  If the balance exceeds $50,000, the company repays as much of the loan balance as it can without going below the minimum.  This loan carries an annual interest rate of 6% (0.5% per month).  At February 28, the loan balance is $14,000, and the company’s cash balance is $50,000.

In excel prepare a table showing the computation of cash payments on merchandise purchases for March and April.

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