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The following data relate to the operations of Picanuy Corporation, a wholesale distributor of consumer goods: a. b. Current assets as of December 31: Cash. Accounts receivable Inventory Buildings and equipment, net. Accounts payable Capital stock. Retained earnings. $6,000 $36,000 $9,800 December (actual) $110,885 $32,550. $100,000. $30,135 The gross margin is 30% of sales. (In other words, cost of goods sold is 70% of sales.) Actual and budgeted sales data are as follows: $60.000 ---------

The following data relate to the operations of Picanuy Corporation, a wholesale distributor of consumer goods: a. b. Current assets as of December 31: Cash. Accounts receivable Inventory Buildings and equipment, net. Accounts payable Capital stock. Retained earnings. $6,000 $36,000 $9,800 December (actual) $110,885 $32,550. $100,000. $30,135 The gross margin is 30% of sales. (In other words, cost of goods sold is 70% of sales.) Actual and budgeted sales data are as follows: $60.000 ---------

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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Explain how these answers were solved. Start at - Excess Deficency of cash, all the way to cash balance ending.
Cash budget: Cash balance, beginning.... Add cash collections. Total cash available..... Less cash disbursements: For inventory...... For operating expenses.. For equipment... Total disbursements Excess (deficiency) of cash Financing: Borrowings. Repayments. Interest*. Total financing Cash balance, ending. * $3,000 x 1% x 3 = $6,000 x 1% x 2 = Total interest January February $ 6,000 64,000 70,000 45,150 51,975 19,400 20,200 3,000 8,000 67,550 80,175 2,450 3,000 0 0 3,000 $5,450 March $ 5,450 $ 5,275 74,000 82,000 220,000 79,450 87,275 226,000 $90 120 $210 (725) 6,000 0 0 Quarter $ 6,000 6,000 $5,275 56,350 153,475 20,600 60,200 0 11,000 76,950 224,675 1,325 10,325 9,000 (5,000) (210) 0 (5,000) (210) (5,210) $5,115 $5,115 3,790
Transcribed Image Text:Cash budget: Cash balance, beginning.... Add cash collections. Total cash available..... Less cash disbursements: For inventory...... For operating expenses.. For equipment... Total disbursements Excess (deficiency) of cash Financing: Borrowings. Repayments. Interest*. Total financing Cash balance, ending. * $3,000 x 1% x 3 = $6,000 x 1% x 2 = Total interest January February $ 6,000 64,000 70,000 45,150 51,975 19,400 20,200 3,000 8,000 67,550 80,175 2,450 3,000 0 0 3,000 $5,450 March $ 5,450 $ 5,275 74,000 82,000 220,000 79,450 87,275 226,000 $90 120 $210 (725) 6,000 0 0 Quarter $ 6,000 6,000 $5,275 56,350 153,475 20,600 60,200 0 11,000 76,950 224,675 1,325 10,325 9,000 (5,000) (210) 0 (5,000) (210) (5,210) $5,115 $5,115 3,790
The following data relate to the operations of Picanuy Corporation, a wholesale distributor of consumer goods: a. b. C. d. e. f. g. h. Current assets as of December 31: Cash. Accounts receivable Inventory.. Buildings and equipment, net. Accounts payable Capital stock.. Retained earnings. $6,000 $36,000 $9,800 $110,885 $32,550. $100,000. $30,135 The gross margin is 30% of sales. (In other words, cost of goods sold is 70% of sales.) Actual and budgeted sales data are as follows: December (actual). January. February.. March.. April $60,000 $70,000 $80,000 $85,000 $55,000. Sales are 40% for cash and 60% on credit. Credit sales are collected in the month following sale. The accounts receivable at December 31 are the result of December credit sales. Each month's ending inventory should equal 20% of the following month's budgeted cost of goods sold. One-quarter of a month's inventory purchases is paid for in the month of purchase; the other three-quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory. Monthly expenses are as follows: commissions, $12,000; rent, $1,800; other expenses (exclud- ing depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $2,400 for the quarter and includes depreciation on new assets acquired during the quarter. Equipment will be acquired for cash: $3,000 in January and $8,000 in February. Management would like to maintain a minimum cash balance of $5,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $50,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that inter- est is not compounded. The company would, as far as it is able, repay the loan plus accumu- lated interest at the end of the quarter. moth
Transcribed Image Text:The following data relate to the operations of Picanuy Corporation, a wholesale distributor of consumer goods: a. b. C. d. e. f. g. h. Current assets as of December 31: Cash. Accounts receivable Inventory.. Buildings and equipment, net. Accounts payable Capital stock.. Retained earnings. $6,000 $36,000 $9,800 $110,885 $32,550. $100,000. $30,135 The gross margin is 30% of sales. (In other words, cost of goods sold is 70% of sales.) Actual and budgeted sales data are as follows: December (actual). January. February.. March.. April $60,000 $70,000 $80,000 $85,000 $55,000. Sales are 40% for cash and 60% on credit. Credit sales are collected in the month following sale. The accounts receivable at December 31 are the result of December credit sales. Each month's ending inventory should equal 20% of the following month's budgeted cost of goods sold. One-quarter of a month's inventory purchases is paid for in the month of purchase; the other three-quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory. Monthly expenses are as follows: commissions, $12,000; rent, $1,800; other expenses (exclud- ing depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $2,400 for the quarter and includes depreciation on new assets acquired during the quarter. Equipment will be acquired for cash: $3,000 in January and $8,000 in February. Management would like to maintain a minimum cash balance of $5,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $50,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that inter- est is not compounded. The company would, as far as it is able, repay the loan plus accumu- lated interest at the end of the quarter. moth
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