
Connect 2 Semester Access Card for Financial and Managerial Accounting
6th Edition
ISBN: 9780077633059
Author: John Wild, Ken Shaw
Publisher: McGraw-Hill Education
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Question
Chapter 20, Problem 2PSA
(1)
To determine
To prepare: Cash receipts budget for the month of July, August and September.
(1)
Expert Solution

Explanation of Solution
Cash receipts | |||
Particulars | July Amount ($) | August Amount ($) | September Amount ($) |
Budgeted sales | 64,000 | 80,000 | 48,000 |
Cash collection of sales: | |||
Current month (20%) | 12,800 | 16,000 | 9,600 |
Previous month (80%) | 45,000 | 51,200 | 64,000 |
Total | 57,800 | 67,200 | 73,600 |
Table (1) |
(2)
To determine
To prepare: Monthly
(2)
Expert Solution

Explanation of Solution
Company B | |||
Cash Budget | |||
Particulars | July Amount($) | August Amount($) | September Amount($) |
Beginning cash balance | 15,000 | 15,000 | 25,504 |
Add: Cash receipts | 57,800 | 67,200 | 73,600 |
Total cash available | 72,800 | 82,200 | 99,104 |
Less: Cash disbursement (working note 1) | 57,350 | 52,146 | 49,700 |
Preliminary cash balance | 15,450 | 30,054 | 49,404 |
Less: Required ending balance | 15,000 | 15,000 | 15,000 |
Surplus | 450 | 15,054 | 34,404 |
Beginning balance of loan | 5,000 | 4,550 | 0 |
Add: Additional loan from bank | 0 | 0 | 0 |
Less: Repayment of loan | 450 | 4,550 | 0 |
Ending balance of loan | 4,550 | 0 | 0 |
Cash balance to be carried forward after payment of loan. | 15,000 | 25,504 | 49,404 |
Table (2) |
Working Note 1:
Cash Disbursements | |||
Particulars | July Amount($) | August Amount($) | September Amount($) |
Interest (working note 2) | 50 | 46 | 0 |
Direct material | 16,160 | 13,440 | 13,760 |
Direct labor | 4,040 | 3,360 | 3,440 |
Factory | 20,200 | 16,800 | 17,200 |
Sales commission | 6,400 | 8,000 | 4,800 |
Office salaries | 4,000 | 4,000 | 4,000 |
Rent | 6,500 | 6,500 | 6,500 |
Total | 57,350 | 52,146 | 49,700 |
Table (3) |
Working note 2:
Formula to calculate interest expense for the month,
For July,
Beginning balance of loan is $5,000.
Substitute $5,000 for beginning balance.
For August,
Beginning balance of loan $4,550 (calculated).
Substitute $4,550 for beginning balance.
For September,
Beginning balance of loan $0 (calculated).
Substitute $0 for beginning balance.
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Chapter 20 Solutions
Connect 2 Semester Access Card for Financial and Managerial Accounting
Ch. 20 - Prob. 1MCQCh. 20 - Prob. 2MCQCh. 20 - Prob. 3MCQCh. 20 - Prob. 4MCQCh. 20 - Prob. 5MCQCh. 20 - Identify at least three benefits of budgeting in...Ch. 20 - What two common benchmarks can be used to evaluate...Ch. 20 - What is the benefit of continuous budgeting?Ch. 20 - Identify three usual time horizons for short-term...Ch. 20 - Why should each department participate in...
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