Front Range Furniture is preparing a Cash Budget for the second quarter of the coming year. Management would like to give you additional exposure to budgeting during your internship and has assigned you the task of preparing this Cash Budget. You will present this to your accounting supervisor for review. The following data has been forecasted: April May Sales $150,000 $157,000 Merchandise Purchases 107,000 112,400 Operating Expenses Payroll Advertising 13,600 14,280 5,400 5,700 Rent Depreciation 2,500 2,500 7,500 7,500 End of April balances Bank loan payable 26,000 Additional data: A. Sales are 40% cash and 60% credit. The collection pattern for credit sales is 50% in the month following the sale and 50% in the month thereafter. Total sales in March were $125,000. B. Purchases are all on credit, with 40% paid in the month of purchase; the balance is paid in the following month. C. Operating expenses are paid in the month they are incurred. D. A minimum cash balance of $25,000 is required at the end of each month. E. Loans are used to maintain the minimum cash balance. At the end of each month; interest of 1% per month is paid on the outstanding loan balance as of the beginning of the month. Repayments are made whenever excess cash is available. Required: 1. Prepare the company's cash budget for May on the next page. Show the ending loan balance at May 1.
Front Range Furniture is preparing a Cash Budget for the second quarter of the coming year. Management would like to give you additional exposure to budgeting during your internship and has assigned you the task of preparing this Cash Budget. You will present this to your accounting supervisor for review. The following data has been forecasted: April May Sales $150,000 $157,000 Merchandise Purchases 107,000 112,400 Operating Expenses Payroll Advertising 13,600 14,280 5,400 5,700 Rent Depreciation 2,500 2,500 7,500 7,500 End of April balances Bank loan payable 26,000 Additional data: A. Sales are 40% cash and 60% credit. The collection pattern for credit sales is 50% in the month following the sale and 50% in the month thereafter. Total sales in March were $125,000. B. Purchases are all on credit, with 40% paid in the month of purchase; the balance is paid in the following month. C. Operating expenses are paid in the month they are incurred. D. A minimum cash balance of $25,000 is required at the end of each month. E. Loans are used to maintain the minimum cash balance. At the end of each month; interest of 1% per month is paid on the outstanding loan balance as of the beginning of the month. Repayments are made whenever excess cash is available. Required: 1. Prepare the company's cash budget for May on the next page. Show the ending loan balance at May 1.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Answer both questions 1 and 2.if answered within 45mins,it would be appreciable!!!

Transcribed Image Text:PART III - FIXED & FLEXIBLE BUDGETS; VARIANCE ANALYSIS (chapters 22 & 23 review)
Front Range Furniture is preparing a Cash Budget for the second quarter of the coming year.
Management would like to give you additional exposure to budgeting during your internship
and has assigned you the task of preparing this Cash Budget. You will present this to your
accounting supervisor for review.
The following data has been forecasted:
April
May
Sales
$150,000 $157,000
Merchandise Purchases
107,000
112,400
Operating Expenses
Payroll
Advertising
13,600
5,400
14,280
5,700
Rent
2,500
7,500
2,500
Depreciation
7,500
End of April balances
Bank loan payable
26,000
Additional data:
A. Sales are 40% cash and 60% credit. The collection pattern for credit sales is 50% in
the month following the sale and 50% in the month thereafter. Total sales in March
were $125,000.
B. Purchases are all on credit, with 40% paid in the month of purchase; the balance is
paid in the following month.
C. Operating expenses are paid in the month they are incurred.
D. A minimum cash balance of $25,000 is required at the end of each month.
E. Loans are used to maintain the minimum cash balance. At the end of each month;
interest of 1% per month is paid on the outstanding loan balance as of the beginning
of the month. Repayments are made whenever excess cash is available.
Required:
1. Prepare the company's cash budget for May on the next page. Show the ending loan
balance at May 1.
After accurate completion of the Cash Budget for the month of May, your supervisor wants to
see how much you remember about Flexible Budgets and Variance Analysis from your
introductory accounting principles course. Management of Front Range Furniture wants to
begin using flexible budgets in the hopes of better planning for future operations. Your next

Transcribed Image Text:task assigned is to create a flexible budget from the information below with a basic variance
analysis. This will require review and approval before sending on to the company controller.
Front Range Furniture provides the following Fixed Budget data for the year:
Sales (20,000 units; $31.50 per unit)
Cost of sale:
$630,000
Direct materials
$210,000
Direct labor
168,000
63,000
Variable overhead
Fixed overhead
500,000
$130,000
80,000
Gross Profit
Operating expense:
Fixed
$12,000
Variable
62,000
$78,000
40,000
Income from operations
The company's actual activity for the year follows:
Sales (21,000 units)
$651,000
Cost of goods sold:
Direct materials
$231,000
Direct labor
168,000
Variable overhead
73,500
77,500
Fixed overhead
550,000
$101,000
Gross Profit
Operating expense:
Fixed
$12,000
Variable
51,500
9,500
39,500
Income fro
operations
Required:
2. Prepare a flexible budget performance report for the year using the contribution margin
format on the appropriate tab of your working papers. You will be "flexing" the budget
to a sales level of 21,000. Be sure to complete all columns provided. Be sure to answer
the questions below the chart in your working papers.
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