Determine cash flow and other financial effectsa. Cash collection schedule Estimated unit sales for the first quarter of 2021 is 40,000 units and expected to increase 10% quarterly. Sellingprice fluctuates as follows:1.Quarter1st2nd3rd4thUnit price64666262Assume that of each quarter's sales: 20% are cash sales while the remaining 80% are credit sales. Shrek & FionaCompany estimates that 60% of credit sales are collected in the quarter of sale with 2% discount, 30% in the quarterof following sale, 9% in the second quarter following sale and 1% are considered as uncollectible.2. Finished product requires 3 pounds of direct materials at P2.50 per pound. Finished good ending inventory isequal to 10% of the next quarter sales while raw materials ending inventory is equal to 10% of the next quarterproduction needs of materials. First quarter of 2022 sales is expected to be at 50,000 units while raw materialsending is at 13,500 pounds. (Units are rounded to the nearest ones.)3. Each quarter's purchase are paid 50% in that quarter with 5% purchase discount, 25% in the following quarterand the remainder in the second quarter following the purchase.4. Each finished goods requires 5 direct labor hours with an hourly rate of P4.00 payable on the end of eachmonth.5. For Factory overhead budget, use the following cost formula:Indirect laborPO.02 per direct labor worked (same payment scheme with direct labor)P2 per unit producedP48,000 annually, paid at the beginning of the yearIndirect materialInsuranceFactory rentP6,500 per monthUtilitiesP500 per quarter plus PO.50 per unit producedP300 per quarter plus PO.30 per unit produced10% of the PPE cost, annuallyMaintenanceDepreciationAll overhead costs involve cash outlays are paid in the period which they are incurred, insurance cost. Worthy tonote, the company assumes that all indirect materials are used and paid in the month it was purchased.6. Selling and administrative expensesAdvertisingP65,000 annually, paid at the beginning of the year5% of total sales, paid quarterlyCommissionAdmin salariesP100,000 per quarter (same payment scheme with direct labor)Office rentP5,000 per month7. Income tax is 30%, paid on the first quarter of the following year.8. For cash budget, assume the following:a. The company desires to maintain P15,000 minimum cash balanceb. Dividend is declared every end of the 4 quarter of the year P15 per issued and outstanding share and paidevery 2 quarter of the following yearc. At the end of the 2 quarter, the company plans to purchase P100,000 worth of equipment.d. Any excess cash at the end of the 1" quarter of the year is used to buy long term investments P10,000increments. 3% interest rate is credited to the company's bank account at the quarter's end based onoriginal cost of investmente. In case of deficit, the company borrow from the bank P10,000 increments, payable in one year, 10% interestrate is automatically debited to the company's bank account at the end of every quarter. Shrek & Fiona Company, manufacturer of a single product, is preparing their annual budget for 2021:Requirements:1. Prepare a Sales Budget2. Determine production volume3. Estimate manufacturing costs and operating expensesa. Purchases (material) budgetb. Personnel budgetc Overhead budgetd. Selling and administrative budget4. Determine cash flow and other financial effectsa. Cash collection scheduleb. Cash disbursement for purchases, factory overhead, and selling and administrative expenses. Cash budget5. Formulate Projected Financial Statements (As of December 31, 2021)a. Budgeted Cost of Goods Manufacturedb. Budgeted Income StatementC. Budgeted Balance SheetThe following are the assumptions to be used:Shrek & Fiona CompanyStatement of Financial PositionAs of December 31, 2020Current AssetsCurrent LiabilitiesCash18,000Accounts Payable (N2)240,000Accounts Receivable (N1)1,192,000Taxes Payable13,200Less: Uncollectible accounts(22,400) 1,169,600Dividends Payable500,000InventoriesTotal Current Liabilities753,200Raw Materials (12,000 pounds)30,000Finished Goods (4,000 units)140,000170,0001,357,600Total Current AssetsStockholder's EquityCommon Stock (100,000 shares)Retained Earnings500,000Non-current Assets360,400Property, plant, and equipment320,000Total Stockholder's Equity860,400Less: Accumulated depreciation(64,000)256,000Total Assets1,613,600Total Liabilities and SHE1,613,600N1 2020 3rd quarter sales P2,500,000200,0002020 dth quarter sales P3,100,000992,000P 1,192,000N2 2020 3rd quarter purchases P300,000P75,0002020 4th quarter purchases P330,000165,000P240,000

Name: Determine cash flow and other financial effectsa. Cash collection sche
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Description: Determine cash flow and other financial effectsa. Cash collection schedule Estimated unit sales for the first quarter of 2021 is 40,000 units and expected to increase 10% quarterly. Sellingprice fluctuates as follows:1.Quarter1st2nd3rd4thUnit price64

Budgeted cash collection is the expected cash is to be collected in a particular month for the…

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Determine cash flow and other financial effects a. Cash collection schedule

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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Concept explainers

Reporting Cash Flows

Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.

Balance Sheet

A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.

Financial Statements

Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.

Owner's Capital

Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.

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Question

Determine cash flow and other financial effects
a. Cash collection schedule

Estimated unit sales for the first quarter of 2021 is 40,000 units and expected to increase 10% quarterly. Selling
price fluctuates as follows:
1.
Quarter
1st
2nd
3rd
4th
Unit price
64
66
62
62
Assume that of each quarter's sales: 20% are cash sales while the remaining 80% are credit sales. Shrek & Fiona
Company estimates that 60% of credit sales are collected in the quarter of sale with 2% discount, 30% in the quarter
of following sale, 9% in the second quarter following sale and 1% are considered as uncollectible.
2. Finished product requires 3 pounds of direct materials at P2.50 per pound. Finished good ending inventory is
equal to 10% of the next quarter sales while raw materials ending inventory is equal to 10% of the next quarter
production needs of materials. First quarter of 2022 sales is expected to be at 50,000 units while raw materials
ending is at 13,500 pounds. (Units are rounded to the nearest ones.)
3. Each quarter's purchase are paid 50% in that quarter with 5% purchase discount, 25% in the following quarter
and the remainder in the second quarter following the purchase.
4. Each finished goods requires 5 direct labor hours with an hourly rate of P4.00 payable on the end of each
month.
5. For Factory overhead budget, use the following cost formula:
Indirect labor
PO.02 per direct labor worked (same payment scheme with direct labor)
P2 per unit produced
P48,000 annually, paid at the beginning of the year
Indirect material
Insurance
Factory rent
P6,500 per month
Utilities
P500 per quarter plus PO.50 per unit produced
P300 per quarter plus PO.30 per unit produced
10% of the PPE cost, annually
Maintenance
Depreciation
All overhead costs involve cash outlays are paid in the period which they are incurred, insurance cost. Worthy to
note, the company assumes that all indirect materials are used and paid in the month it was purchased.
6. Selling and administrative expenses
Advertising
P65,000 annually, paid at the beginning of the year
5% of total sales, paid quarterly
Commission
Admin salaries
P100,000 per quarter (same payment scheme with direct labor)
Office rent
P5,000 per month
7. Income tax is 30%, paid on the first quarter of the following year.
8. For cash budget, assume the following:
a. The company desires to maintain P15,000 minimum cash balance
b. Dividend is declared every end of the 4 quarter of the year P15 per issued and outstanding share and paid
every 2 quarter of the following year
c. At the end of the 2 quarter, the company plans to purchase P100,000 worth of equipment.
d. Any excess cash at the end of the 1" quarter of the year is used to buy long term investments P10,000
increments. 3% interest rate is credited to the company's bank account at the quarter's end based on
original cost of investment
e. In case of deficit, the company borrow from the bank P10,000 increments, payable in one year, 10% interest
rate is automatically debited to the company's bank account at the end of every quarter.

Shrek & Fiona Company, manufacturer of a single product, is preparing their annual budget for 2021:
Requirements:
1. Prepare a Sales Budget
2. Determine production volume
3. Estimate manufacturing costs and operating expenses
a. Purchases (material) budget
b. Personnel budget
c Overhead budget
d. Selling and administrative budget
4. Determine cash flow and other financial effects
a. Cash collection schedule
b. Cash disbursement for purchases, factory overhead, and selling and administrative expenses
. Cash budget
5. Formulate Projected Financial Statements (As of December 31, 2021)
a. Budgeted Cost of Goods Manufactured
b. Budgeted Income Statement
C. Budgeted Balance Sheet
The following are the assumptions to be used:
Shrek & Fiona Company
Statement of Financial Position
As of December 31, 2020
Current Assets
Current Liabilities
Cash
18,000
Accounts Payable (N2)
240,000
Accounts Receivable (N1)
1,192,000
Taxes Payable
13,200
Less: Uncollectible accounts
(22,400) 1,169,600
Dividends Payable
500,000
Inventories
Total Current Liabilities
753,200
Raw Materials (12,000 pounds)
30,000
Finished Goods (4,000 units)
140,000
170,000
1,357,600
Total Current Assets
Stockholder's Equity
Common Stock (100,000 shares)
Retained Earnings
500,000
Non-current Assets
360,400
Property, plant, and equipment
320,000
Total Stockholder's Equity
860,400
Less: Accumulated depreciation
(64,000)
256,000
Total Assets
1,613,600
Total Liabilities and SHE
1,613,600
N1 2020 3rd quarter sales P2,500,000
200,000
2020 dth quarter sales P3,100,000
992,000
P 1,192,000
N2 2020 3rd quarter purchases P300,000
P
75,000
2020 4th quarter purchases P330,000
165,000
P
240,000

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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