Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 6, Problem 6.45P
Refer to the information in Problem 6-44.
All purchases made in a given month are paid for in the following month, and direct material purchases make up all of the accounts payable balance and are reflected in the accounts payable balances at the beginning and the end of the year.
Sales are made to customers with terms net 45 days. Fifty percent of a month’s sales are collected in the month of the sale, 25% are collected in the month following the sale, and 25% are collected two months after the sale and are reflected in the accounts receivables balances at the beginning and the end of the year. Direct manufacturing labor, variable manufacturing
Selected balances for December 31, 2017, follow:
| Cash | $29,200 |
| Accounts payable | 21,450 |
| 40,000 |
Selected budget information for December 2018 follows:
| Accounts payable | $27,770 |
| Accounts receivable | 48,500 |
Hazlett has budgeted to purchase equipment costing $145,000 for cash during 2018. Hazlett desires a minimum cash balance of $25,000. The company has a line of credit from which it may borrow in increments of $1,000 at an interest rate of 12% per year. By special arrangement, with the bank, Hazlett pays interest when repaying the principal, which only needs to be repaid in 2019.
- 1. Prepare a cash budget for 2018. If Hazlett must borrow cash to meet its desired ending cash balance, show the amount that must be borrowed.
- 2. Does the cash budget for 2018 give Hazlett’s managers all of the information necessary to manage cash in 2018? How might that be improved?
- 3. What insight does the cash budget give to Hazlett’s managers that the
budgeted income statement does not?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
From the attached photo answer the following:
1. What is the sales collection schedule for the six (6) months showing the accounts receivable at the end of the six months ending June 2021.2.What is he purchase payment schedule for the six (6) months showing discounts received and accounts payable at the end of the six months ending June 2021.3. What is the cash budget including a total column for the three (3) months ending June 2021 (April to June 2021).
Rivers Company purchases merchandise on account. In general, Rivers pays 50 percent in the month of purchase and 50 percent in the
following month. All payments in the month of purchase qualify for a 2 percent cash discount. First quarter budgeted purchases are:
January
February
March
$90,000
80,000
96,000
A. What are the total cash disbursements expected in February?
$
B. What are the total cash disbursements expected in March?
C. Now suppose that there is no cash discount for purchases made in the month of purchase. What are the total cash disbursements
expected in February and in March?
February cash disbursements
March cash disbursements
Required:
1.Prepare a cash receipts budget schedule for each of the first three months (July – September), including the total receipts per month
2.Prepare a material purchases budget schedule for each of the first three months (July – September), including the total purchases per month
3.Prepare a cash budget for the month of July. Include the owners’ cash contributions
Chapter 6 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 6 - What are the four elements of the budgeting cycle?Ch. 6 - Define master budget.Ch. 6 - Strategy, plans, and budgets are unrelated to ore...Ch. 6 - Budgeted performance is a better criterion than...Ch. 6 - Production managers and marketing managers are...Ch. 6 - Budgets meet the cost-benefit test. They force...Ch. 6 - Define rolling budget. Give an example.Ch. 6 - Outline the steps in preparing an operating...Ch. 6 - The sales forecast is the cornerstone for...Ch. 6 - Prob. 6.10Q
Ch. 6 - Define Kaizen budgeting.Ch. 6 - Prob. 6.12QCh. 6 - Explain how the choice of the type of...Ch. 6 - What are some additional considerations that arise...Ch. 6 - Prob. 6.15QCh. 6 - Master budget. Which of the following statements...Ch. 6 - Operating and financial budgets. Which of the...Ch. 6 - Production budget. Superior Industries sales...Ch. 6 - Responsibility centers. Elmhurst Corporation is...Ch. 6 - Cash budget. Mary Jacobs, the controller of the...Ch. 6 - Sales budget, service setting. In 2017 Hart Sons,...Ch. 6 - Sales and production budget. The Coby Company...Ch. 6 - Direct material budget. Dawson Co. produces wine....Ch. 6 - Material purchases budget. The McGrath Company has...Ch. 6 - Revenues, production, and purchases budgets. The...Ch. 6 - Revenues and production budget. Saphire, Inc.,...Ch. 6 - Budgeting; direct material usage, manufacturing...Ch. 6 - Budgeting, service company. Ever Clean Company...Ch. 6 - Budgets for production and direct manufacturing...Ch. 6 - Activity-based budgeting. The Jerico store of...Ch. 6 - Kaizen approach to activity-based budgeting...Ch. 6 - Responsibility and controllability. Consider each...Ch. 6 - Responsibility, controllability, and stretch...Ch. 6 - Cash flow analysis, sensitivity analysis....Ch. 6 - Budget schedules for a manufacturer. Hale...Ch. 6 - Budgeted costs, Kaizen improvements environmental...Ch. 6 - Revenue and production budgets. (CPA, adapted) The...Ch. 6 - Budgeted income statement. (CMA, adapted) Smart...Ch. 6 - Prob. 6.39PCh. 6 - Comprehensive problem with ABC costing. Animal...Ch. 6 - Cash budget (continuation of 6-40). Refer to the...Ch. 6 - Comprehensive operating budget. Skulas, Inc.,...Ch. 6 - Cash budgeting, budgeted balance sheet....Ch. 6 - Comprehensive problem; ABC manufacturing, two...Ch. 6 - Cash budget. (Continuation of 6-44) (Appendix)...Ch. 6 - Budgeting and ethics. Jayzee Company manufactures...Ch. 6 - Kaizen budgeting for carbon emissions. Apex...Ch. 6 - Comprehensive budgeting problem; activity-based...
Additional Business Textbook Solutions
Find more solutions based on key concepts
Based on your answers to the above questions, should Lockwood invest in the machinery?
Horngren's Financial & Managerial Accounting, The Managerial Chapters (6th Edition)
What are assets limited as to use and how do they differ from restricted assets?
Accounting For Governmental & Nonprofit Entities
Bank loan; accrued interest LO132 On October 1, Eder Fabrication borrowed 60 million and issued a nine-month, ...
Intermediate Accounting
18. What is the calculation for return on assets (ROA)? Explain what ROA measures.
Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
Bank loan; accrued interest LO132 On October 1, Eder Fabrication borrowed 60 million and issued a nine-month, ...
INTERMEDIATE ACCOUNTING
Calculating certain information using the direct method (Learning Objective 4) 20-25 min. Trudeaus Marine, Inc....
Financial Accounting, Student Value Edition (5th Edition)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- All Temps has a policy of always paying within the discount period, and each of its suppliers provides a discount of 2% if paid within 10 days of purchase. Because of the purchase policy, 80% of its payments are made in the month of purchase and 20% are made the following month. The direct materials budget provides for purchases of $23,812 in February, $23,127 in March, $21,836 in April, and $28,173 in May.What is the balance in accounts payable for April 30, and May 31?arrow_forwardCash budget Pasadena Candle Inc. pays 40% of its purchases on account in the month of the purchase and 60% in the month following the purchase. If purchases are budgeted to be 40,000 for August and 36,000 for September, what are the budgeted cash payments for purchases on account for September?arrow_forwardCash collections for Renew Lights found that 65% of sales were collected in the month of sale, 25% was collected the month after the sale, and 10% was collected the second month after the sale. Given the sales shown, how much cash will be collected in March and April?arrow_forward
- My Aunts Closet Store collects 60% of its accounts receivable in the month of sale and 35% in the month after the sale. Given the following sales, how much cash will be collected in March?arrow_forwardCash budget The controller of Mercury Shoes Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: The company expects to sell about 10% of its merchandise for cash. Of sales on account, 60% are expected to be collected in the month following the sale and the remainder the following month (second month after sale). Depreciation, insurance, and property tax expense represent 12,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in February, and the annual property taxes are paid in November. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month. Current assets as of June 1 include cash of 42,000, marketable securities of 25,000, and accounts receivable of 198,000 (150,000 from May sales and 48,000 from April sales). Sales on account in April and May were 120,000 and 150,000, respectively. Current liabilities as of June 1 include 13,000 of accounts payable incurred in May for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of 24,000 will be made in July. Mercury Shoes regular quarterly dividend of 15,000 is expected to be declared in July and paid in August. Management desires to maintain a minimum cash balance of 40,000. Instructions Prepare a monthly cash budget and supporting schedules for June, July, and August. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?arrow_forwardCash budget The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: The company expects to sell about 10% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month following the sale and the remainder the following month (second month following sale). Depreciation, insurance, and property tax expense represent 50,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in January, and the annual property taxes are paid in December. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month. Current assets as of September 1 include cash of 40,000, marketable securities of 75,000, and accounts receivable of 300,000 (60,000 from July sales and 240,000 from August sales). Sales on account for July and August were 200,000 and 240,000, respectively. Current liabilities as of September 1 include 40,000 of accounts payable incurred in August for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of 55,000 will be made in October. Bridgeports regular quarterly dividend of 25,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of 50,000. Instructions Prepare a monthly cash budget and supporting schedules for September, October, and November. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?arrow_forward
- Pilsner Inc. purchases raw materials on account for use in production. The direct materials purchases budget shows the following expected purchases on account: Pilsner typically pays 25% on account in the month of billing and 75% the next month. Required: 1. How much cash is required for payments on account in May? 2. How much cash is expected for payments on account in June?arrow_forwardA companys sales for the coming months are as follows: About 20 percent of sales are cash sales, and the remainder are credit sales. The company finds that typically 10 percent of a months credit sales are paid in the month of sale, 70 percent are paid the next month, and 15 percent are paid in the second month after sale. Expected cash receipts in July are budgeted at what amount? a. 114,520 b. 143,150 c. 145,720 d. 156,000arrow_forwardRelevant data from the Poster Companys operating budgets are: Additional data: Capital assets were sold in January for $10,000 and $4,500 in May. Dividends of $4,500 were paid in February. The beginning cash balance was $60,359 and a required minimum cash balance is $59,000. Use this information to prepare a cash budget for the first two quarters of the yeararrow_forward
- The most common budget is prepared for a __________. A. week B. month C. quarter D. yeararrow_forwardPalmgren Company produces consumer products. The sales budget for four months of the year is presented below. Company policy requires that ending inventories for each month be 25 percent of next months sales. At the beginning of July, the beginning inventory of consumer products met that policy. Required: Prepare a production budget for the third quarter of the year. Show the number of units that should be produced each month as well as for the quarter in total.arrow_forwardPrime Products hopes to borrow $30,000 on April 1 and repay it plus interest of $1,200 on June 30. The following data are available for the months April through June, during which the loan will be used: a. On April 1, the start of the loan period, the cash balance will be $24,000. Accounts receivable on April 1 will total $140,000, of which $120,000 will be collected during April and $16,000 will be collected during May. The remainder will be uncollectible. b. The company estimates 30% of a month's sales are collected in the month of sale, 60% in the month following sale, and 8% in the second month following sale. The other 2% are bad debts that are never collected. Budgeted sales and expenses for the three- month period follow: Sales (all on account) Merchandise purchases Payroll Lease payments Advertising Equipment purchases Depreciation April $ 300,000 210,000 $ 20,000 $ $ 22,000 $ 60,000 $ 15,000 Required 1 Required 2 Total cash collections May $ 400,000 $ 160,000 c. Merchandise…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Responsibility Accounting| Responsibility Centers and Segments| US CMA Part 1| US CMA course; Master Budget and Responsibility Accounting-Intro to Managerial Accounting- Su. 2013-Prof. Gershberg; Author: Mera Skill; Rutgers Accounting Web;https://www.youtube.com/watch?v=SYQ4u1BP24g;License: Standard YouTube License, CC-BY