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Dionne Santos, the general manager of DS Stores, want to find ou has enough cash to pay for a P 6-million price of property which another branch. This is expected to be paid in the third quarter o company decide to buy it. He asked the chief accountant to prepa The following assumptions are used in the preparation of the cash a) Projected quarterly sales are as follows: First quarter Second quarter Third quarter P 12,000,000 P 15,000,000 P 15,000,000 P 18,000,000 Fourth quarter

Dionne Santos, the general manager of DS Stores, want to find ou has enough cash to pay for a P 6-million price of property which another branch. This is expected to be paid in the third quarter o company decide to buy it. He asked the chief accountant to prepa The following assumptions are used in the preparation of the cash a) Projected quarterly sales are as follows: First quarter Second quarter Third quarter P 12,000,000 P 15,000,000 P 15,000,000 P 18,000,000 Fourth quarter

FINANCIAL ACCOUNTING
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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Prepare cash budget

Assimilation 3. Dionne Santos, the general manager of DS Stores, want to find out if their company has enough cash to pay for a P 6-million price of property which may be the site of another branch. This is expected to be paid in the third quarter of 2016 should the company decide to buy it. He asked the chief accountant to prepare a cash budget. The following assumptions are used in the preparation of the cash budget. a) Projected quarterly sales are as follows: First quarter Second quarter P 12,000,000 Third quarter Fourth quarter P 15,000,000 P 15,000,000 P 18,000,000
Transcribed Image Text:Assimilation 3. Dionne Santos, the general manager of DS Stores, want to find out if their company has enough cash to pay for a P 6-million price of property which may be the site of another branch. This is expected to be paid in the third quarter of 2016 should the company decide to buy it. He asked the chief accountant to prepare a cash budget. The following assumptions are used in the preparation of the cash budget. a) Projected quarterly sales are as follows: First quarter Second quarter P 12,000,000 Third quarter Fourth quarter P 15,000,000 P 15,000,000 P 18,000,000
b) Seventy percent (70%) of the sales are collected in the quarter. The remaining 30% is paid the following quarter. c) Cost of sales is 75% of sales. Inventories are purchased in the same quarter sales were generated. Ninety percent of the purchased is paid within the quarter these purchases are made and the remaining 10% is paid the following quarter. d) Included in fixed operating expenses are salaries, rent, security which amount to P 1,000,000 for the first two quarters. The amount is expected to increase to P 1,250,000 starting third quarter. Variable operating expenses are 5% of sales. e) Interest payments amount to P 200,000 per quarter. f) The company is subject to 30% tax rate. Below are the estimated income tax payments per quarter: First quarter P 500,000 P 360,000 Second quarter P 540,000 Third quarter Fourth quarter P 465,000 g) Cash at the beginning of 2015 is P 750,000. The company plans to increase the target cash balance to P 1,000,000 in 2016. h) Sale for the fourth quarter of 2015 was P 15 million. Requirements: Prepare the 2016 cash budget. Find out if the company will have enough cash to pay the P 6-million property third quarter. (30 points) Answer: DS Stores Cash Budget For the Year Ending December 31, 2016 First Quarter Second Quarter Third Quarter Forth Quarter Collections Quarter of Sales ? A quarter after sales ? ? Total Collections ? Payments Purchases (Payment during the quarter) Purchases (Payment a quarter after) Cash Operating Expenses (variables) Cash Operating Expenses (fixed) Income Taxes Purchase of property ? ? ? ? ? Interest Expense ? ? Total Payments
Transcribed Image Text:b) Seventy percent (70%) of the sales are collected in the quarter. The remaining 30% is paid the following quarter. c) Cost of sales is 75% of sales. Inventories are purchased in the same quarter sales were generated. Ninety percent of the purchased is paid within the quarter these purchases are made and the remaining 10% is paid the following quarter. d) Included in fixed operating expenses are salaries, rent, security which amount to P 1,000,000 for the first two quarters. The amount is expected to increase to P 1,250,000 starting third quarter. Variable operating expenses are 5% of sales. e) Interest payments amount to P 200,000 per quarter. f) The company is subject to 30% tax rate. Below are the estimated income tax payments per quarter: First quarter P 500,000 P 360,000 Second quarter P 540,000 Third quarter Fourth quarter P 465,000 g) Cash at the beginning of 2015 is P 750,000. The company plans to increase the target cash balance to P 1,000,000 in 2016. h) Sale for the fourth quarter of 2015 was P 15 million. Requirements: Prepare the 2016 cash budget. Find out if the company will have enough cash to pay the P 6-million property third quarter. (30 points) Answer: DS Stores Cash Budget For the Year Ending December 31, 2016 First Quarter Second Quarter Third Quarter Forth Quarter Collections Quarter of Sales ? A quarter after sales ? ? Total Collections ? Payments Purchases (Payment during the quarter) Purchases (Payment a quarter after) Cash Operating Expenses (variables) Cash Operating Expenses (fixed) Income Taxes Purchase of property ? ? ? ? ? Interest Expense ? ? Total Payments
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