Student Name: Michael Buckmaster Class: ACC 350 Managerial Accounting Case 08-29 CRAVAT SALES COMPANY Budgets

April 1a. Sales budget: Budgeted sales in units Selling price per unit Total sales 1b. Schedule of expected cash collections: February sales March sales April sales May sales June sales Total cash collections 1c. Merchandise purchases budget: Budgeted sales in units Add budgeted ending inventory Total needs Less beginning inventory Required unit purchases Unit cost Required dollar purchases 35,000 x $8 $ 280,000 Correct! $ 48,000 112,000 70,000 May 45,000 x $8 $ 360,000 Correct! June 6,000 x $8 $ 480,000 Correct! Quarter 140,000 x $8 $ 1,120,000 Correct! $ 56,000 140,000 90,000 $ 286,000 Correct! 45,000 54,000 99,000 (40,500) 58,500 x $5 $ 292,500 Correct! $ 70,000 180,000 120,000 $ 370,000 Correct! 60,000 36,000 96,000 (54,000) 42,000 x $5 $ 210,000 Correct! 48,000 168,000 280,000 270,000 120,000 $ 886,000 Correct! 140,000 36,000 176,000 (31,500) 144,500 x $5 $ 722,500 Correct! $ $ 110,000 146,250 256,250 Correct! $ 146,250 105,000 $ 251,250 Correct! 85,750 220,000 292,500 105,000 $ 703,250 Correct!

230,000 Correct! 35,000 40,500 75,500 (31,500) 44,000

x $5 $ 220,000 Correct! 1d. Budgeted cash disbursements for merchandise purchases: March purchases $ 85,750 April purchases 110,000 May purchases June purchases Total cash payments $ 195,750 Correct! 2.

CRAVAT SALES COMPANY Cash Budget For the Three Months Ending June 30 April 14,000 230,000 244,000 195,750 35,000 22,000 14,000 3,000 12,000 281,750 (37,750) 48,000 48,000 $ 10,250 Correct! May 10,250 286,000 296,250 256,250 45,000 22,000 14,000 3,000 25,000 365,250 (69,000) 79,000 79,000 $ 10,000 Correct! June 10,000 370,000 380,000 251,250 60,000 22,000 14,000 3,000 350,250 29,750 Quarter 14,000 886,000 900,000 703,250 140,000 66,000 42,000 9,000 12,000 25,000 ) (97,250)

Cash balance, beginning Add receipts from customers Total cash available Less disbursements: Purchase of inventory Sales commissions Salaries and wages Utilities Miscellaneous Dividends paid Land purchases Total disbursements Excess (deficiency) of receipts over disbursements Financing: Borrowings Repayments Interest Total financing Cash balance, ending

127,000 (16,000) (16,000) (3,020) (3,020) (19,020) 107,980 $ 10,730 $ 10,730 Correct! Correct!

Student Name: Michael Buckmaster Class: ACC 350 Managerial Accounting Case 08-29

3. CRAVAT SALES COMPANY Budgeted Income Statement For the Three Months Ended June 30 Sales in units Sales Variable expenses: Cost of goods sold Commissions Contribution margin Fixed expenses: Salaries and wages Utilities Insurance expired Depreciation Miscellaneous Net operating income Less interest expense Net income $ 140,000 $ 1,120,000 $ 700,000 140,000

840,000 280,000

66,000 42,000 3,600 4,500 9,000

125,100 154,900 (3,020) $ 151,880 Correct!

4. CRAVAT SALES COMPANY Budgeted Balance Sheet June 30 Assets Cash Accounts receivable Inventory Unexpired insurance Fixed assets, net of depreciation Total assets Liabilities and Stockholders' Equity Accounts payable, purchases Dividends payable Loans payable, bank Capital stock, no par Retained earnings Total liabilities and equity Accounts receivable at June 30: May sales June sales Total Retained earnings at June 30: Balance, March 31 Add net income Total Less dividends declared Balance, June 30 $ 10,730 450,000 180,000 10,800 193,200 $ 844,730 Correct! $ 105,000 12,000 111,000 300,000 316,730 $ 844,730 Correct! $ 90,000 360,000 $ 450,000 Correct! $ 176,850 151,880 328,730 (12,000) $ 316,730 Correct!

Notes Part 1 c 2. Line A-46 2. Line A-29 Conclusion 90% of the next months sales in units Add receipts from customers (Part 1b.) Part 1d. Balances are the maximum amount (in increments of $1,000) that the company could repay to the bank and still have $10,000 ending balance. ** $48,000 x 1% x 3 = $1,440 $79,000 x 1 % x 2 = $1580 Total Interest = $3020 Part 3 Sales revenue (Part 1a.) Cost of goods sold (140,000 ties @ $5 per tie) Commissions (140,000 ties @ $1 per tie) Cash (Part 2) Accounts receivable: 25% x May sales of $360,000 = 90,000 75% x June sales of $480,000 = $360,000 Total $450,000 Inventory (36,000 ties @ $5 per tie) = $180,000

Part 4

Unexpired Insurance ($14,000 - 3,600) = 10,800 Fixed assets, net of depreciation ($172,000 + 25,000 - 4,500) Total assets = $844,730 Accounts payable, purchases (50% x 210,000 Part 1c.) = 105,000 Dividends payable = 12,000 Loans payable, bank (part 2; $127,000 - $16,000) =111,000 Retained earnings (See below) Total liabilities and equity = $844,730

Retained earnings at June 30: Balance March 31 $176,850 Add net income (part 3) =$151, 880 Total $328,730 Less dividends declared ($12,000) Balance June 30 $316,730

Given Data Case 08-29: CRAVAT SALES COMPANY Minimum ending cash balance Selling price Recent and forecast sales (in units): January (actual) February (actual) March (actual) April May June July August September Desired ending inventories (percentage of next month's sales) Cost of earrings Purchases paid as follows: In month of purchase In following month Collection on sales: Sales collected current month Sales collected following month Sales collected 2nd month following Variable monthly expenses: Sales commissions (per tie) Fixed monthly expenses: Wages and salaries Utilities Insurance Depreciation Miscellaneous Land purchased in May Dividends declared each quarter $ $ 10,000 8

20,000 24,000 28,000 35,000 45,000 60,000 40,000 36,000 32,000 90% $ 5

50% 50%

25% 50% 25%

1.00

$ $ $ $ $ $ $

22,000 14,000 1,200 1,500 3,000 25,000 12,000

Given Data Case 08-29: Balance sheet at March 31: Assets Cash Accounts receivable February sales March sales Inventory (31,500 units) Prepaid insurance Fixed assets, net of depreciation Total assets $ $ 48,000 168,000 14,000

216,000 157,500 14,400 172,700 574,600

Liabilities and Stockholders' Equity Accounts payable Dividends payable Capital stock Retained earnings Total liabilities and stockholders' equity Agreement with Bank: Borrowing increments Maximum borrowing amount Interest rate per month Repayment increments Total of interest paid each quarter Required minimum cash balance

85,750 12,000 300,000 176,850 574,600

$ $ $ $

1,000 40,000 1% 1,000 100% 10,000