PROBLEM 716BSchedules of Expected Cash Collections and

Disbursements [LO2, LO4, LO8]

CHECK FIGURE
(3) Ending cash balance: $8,800
Ojai Products, a distributor of organic beverages, needs a cash budget for
September. The following information is available:
a. The cash balance at the beginning of September is $12,800.
b. Actual sales for July and August and expected sales for September are as follows:
July

Cash sales
Sales on account
Total sales

c.

d.
e.
f.

Augus
t
$
$
6,100
4,100
21,000 26,000
27,10
30,100
0

Septemb
er
$ 9,500
37,000
46,500

Sales on account are collected over a three-month period as follows: 10%

collected in the month of sale, 65% collected in the month following sale, and
21% collected in the second month following sale. The remaining 4% is
uncollectible.
Purchases of inventory will total $25,000 for September. Thirty percent of a
month's inventory purchases are paid for during the month of purchase. The
accounts payable remaining from August's inventory purchases total $16,000, all
of which will be paid in September.
Selling and administrative expenses are budgeted at $14,000 for September. Of
this amount, $4,000 is for depreciation.
Equipment costing $18,000 will be purchased for cash during September, and
dividends totaling $4,000 will be paid during the month.
The company maintains a minimum cash balance of $8,800. An open line of
credit is available from the companys bank to bolster the cash balance as
needed.

Required:
1. Prepare a schedule of expected cash collections for September.
2. Prepare a schedule of expected cash disbursements for inventory purchases for
September.
3. Prepare a cash budget for September. Indicate in the financing section any
borrowing that will be needed during September. Assume that any interest will
not be paid until the following month.

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Chapter 7 Alternate Problems

PROBLEM 717BCash Budget with Supporting Schedules [LO2, LO4, LO8]

CHECK FIGURE
(1) August collections: $46,080
(3) July ending cash balance: $3,950
Skolt Products, Inc., is a merchandising company that sells binders, paper, and other
school supplies. The company is planning its cash needs for the third quarter. In the
past, Skolt Products has had to borrow money during the third quarter to support
peak sales of back-to-school materials, which occur during August. The following
information has been assembled to assist in preparing a cash budget for the
quarter:
a. Budgeted monthly absorption costing income statements for JulyOctober are as
follows:
July
Sales
$36,000
Cost of goods sold
21,000
Gross margin
15,000
Selling and administrative expenses:
Selling expense
6,300
Administrative expense*
3,300
Total selling and administrative
9,600
expenses
Net operating income
$ 5,400
*Includes $1,500 depreciation each month.

August
$66,000
39,000
27,000
10,500
6,300

Septemb
er
$64,000
27,000
37,000

October

8,600
6,700

8,100
6,100

$41,000
24,000
17,000

16,800

15,300

14,200

$10,200

$21,700

$ 2,800

b. Sales are 20% for cash and 80% on credit.

c. Credit sales are collected over a three-month period with 20% collected in the
month of sale, 50% in the month following sale, and 30% in the second month
following sale. May sales totaled $41,000, and June sales totaled $33,000.
d. Inventory purchases are paid for within 15 days. Therefore, 50% of a months
inventory purchases are paid for in the month of purchase. The remaining 50% is
paid in the following month. Accounts payable for inventory purchases at June 30
total $12,100.
e. The company maintains its ending inventory levels at 65% of the cost of the
merchandise to be sold in the following month. The merchandise inventory at
June 30 is $13,650.
f. Land costing $4,500 will be purchased in July.
g. Dividends of $1,600 will be declared and paid in September.
h. The cash balance on June 30 is $3,000; the company must maintain a cash
balance of at least this amount at the end of each month.
i. The company has an agreement with a local bank that allows it to borrow in
increments of $1,000 at the beginning of each month, up to a total loan balance
of $40,000. The interest rate on these loans is 1% per month, and for simplicity,
we will assume that interest is not compounded. The company would, as far as it
is able, repay the loan plus accumulated interest at the end of the quarter.
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Introduction to Managerial Accounting, 6th edition

Required:
1. Prepare a schedule of expected cash collections for July, August, and September
and for the quarter in total.
2. Prepare the following for merchandise inventory:
a. A merchandise purchases budget for July, August, and September.
b. A schedule of expected cash disbursements for merchandise purchases for
July, August, and September and for the quarter in total.
3. Prepare a cash budget for July, August, and September and for the quarter in
total.

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Chapter 7 Alternate Problems

PROBLEM 718BCash Budget with Supporting Schedules; Changing

Assumptions [LO2, LO4, LO8]
CHECK FIGURE
(1) August collections: $51,560
(3) July ending cash balance: $8,600
Skolt Products, Inc., is a merchandising company that sells binders, paper, and other
school supplies. The company is planning its cash needs for the third quarter. In the
past, Skolt Products has had to borrow money during the third quarter to support
peak sales of back-to-school materials, which occur during August. The following
information has been assembled to assist in preparing a cash budget for the
quarter:
a. Budgeted monthly absorption costing income statements for JulyOctober are as
follows:
July
Sales
$41,000
Cost of goods sold
24,000
Gross margin
17,000
Selling and administrative expenses:
Selling expense
7,100
Administrative expense*
5,300
Total selling and administrative
12,400
expenses
Net operating income
$ 4,600
*Includes $1,900 depreciation each month.

August

October

$71,000
41,000
30,000

Septemb
er
$51,000
26,000
25,000

11,700
7,000

8,600
5,900

7,200
5,700

18,700

14,500

12,900

$11,300

$10,500

$ 8,100

$46,000
25,000
21,000

b. Sales are 20% for cash and 80% on credit.

c. Credit sales are collected over a three-month period with 15% collected in the
month of sale, 65% in the month following sale, and 20% in the second month
following sale. May sales totaled $26,000, and June sales totaled $32,000.
d. Inventory purchases are paid for within 15 days. Therefore, 50% of a months
inventory purchases are paid for in the month of purchase. The remaining 50% is
paid in the following month. Accounts payable for inventory purchases at June 30
total $11,600.
e. The company maintains its ending inventory levels at 20% of the cost of the
merchandise to be sold in the following month. The merchandise inventory at
June 30 is $4,800.
f. Land costing $4,100 will be purchased in July.
g. Dividends of $1,400 will be declared and paid in September.
h. The cash balance on June 30 is $8,300; the company must maintain a cash
balance of at least this amount at the end of each month.
i. The company has an agreement with a local bank that allows it to borrow in
increments of $1,000 at the beginning of each month, up to a total loan balance
of $44,000. The interest rate on these loans is 1% per month, and for simplicity,
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Introduction to Managerial Accounting, 6th edition

we will assume that interest is not compounded. The company would, as far as it
is able, repay the loan plus accumulated interest at the end of the quarter.
The companys president is interested in knowing how reducing inventory levels and
collecting accounts receivable sooner will impact the cash budget. He revises the
cash collection and ending inventory assumptions as follows:
1. Sales continue to be 20% for cash and 80% on credit. However, credit sales from
July, August, and September are collected over a three-month period with 25%
collected in the month of sale, 55% collected in the month following sale, and
20% in the second month following sale. Credit sales from May and June are
collected during the third quarter using the collection percentages specified in
the main section.
2. The company maintains its ending inventory levels for July, August, and
September at 20% of the cost of merchandise to be sold in the following month.
The merchandise inventory at June 30 remains $4,800 and accounts payable for
inventory purchases at June 30 remains $11,600.
Required:
1. Using the presidents new assumptions in (1) above, prepare a schedule of
expected cash collections for July, August, and September and for the quarter in
total.
2. Using the presidents new assumptions in (2) above, prepare the following for
merchandise inventory:
a. A merchandise purchases budget for July, August, and September.
b. A schedule of expected cash disbursements for merchandise purchases for
July, August, and September and for the quarter in total.
3. Using the presidents new assumptions, prepare a cash budget for July, August,
September, and for the quarter in total.
4. Prepare a brief memorandum for the president explaining how his revised
assumptions affect the cash budget.

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Chapter 7 Alternate Problems

PROBLEM 719BIntegration of Sales, Production, and Direct Materials

Budgets [LO2, LO3, LO4]
CHECK FIGURE
(1) August collections: $71,838
(3b) August payments: $59,572
Swanson, Inc., manufactures an advanced swim fin for scuba divers. Management is
now preparing detailed budgets for the third quarter, July through September, and
has assembled the following information to assist in preparing the budget:
a. The Marketing Department has estimated sales as follows for the remainder of
the year (in pairs of swim fins). The selling price of the swim fins is $13 per pair.
July
August
September

5,600
6,600
4,600

October
Novemb
er
Decemb
er

3,600
2,600
2,600

b. All sales are on account. Based on past experience, sales are expected to be
collected in the following pattern:
43% in the month of sale
48% in the month following
sale
9% uncollectible.
The beginning accounts receivable balance (excluding uncollectible amounts) on
July 1 will be $130,000.
c. The company maintains finished goods inventories equal to 9% of the following
months sales. The inventory of finished goods on July 1 will be 504 pairs.
d. Each pair of swim fins requires 4 pounds of geico compound. To prevent
shortages, the company would like the inventory of geico compound on hand at
the end of each month to be equal to 20% of the following months production
needs. The inventory of geico compound on hand on July 1 will be 4,552 pounds.
e. Geico compound costs $2.50 per pound. Crydon pays for 60% of its purchases in
the month of purchase; the remainder is paid for in the following month. The
accounts payable balance for geico compound purchases will be $11,800 on July
1.
Required:
1. Prepare a sales budget, by month and in total, for the third quarter. (Show your
budget in both pairs of swim fins and dollars.) Also prepare a schedule of
expected cash collections, by month and in total, for the third quarter.
2. Prepare a production budget for each of the months July through October.
3. Prepare a direct materials budget for geico compound, by month and in total, for
the third quarter. Also prepare a schedule of expected cash disbursements for
geico compound, by month and in total, for the third quarter.
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Introduction to Managerial Accounting, 6th edition

PROBLEM 720BCash Budget; Income Statement; Balance Sheet [LO2, LO4,

LO8, LO9, LO10]
CHECK FIGURE
(1) Ending cash balance: $37,270
The balance sheet of Snapshot, Inc., a distributor of photographic supplies, as of
May 31 is given below:
Snapshot, Inc.
Balance Sheet
May 31
Assets
Cash ....................................................................
$ 10,350
.
Accounts
69,000
receivable ...............................................
Inventory .............................................................
34,500
.
Buildings and equipment, net of
576,150
depreciation ...........
Total
$690,000
assets ...........................................................
Liabilities and Stockholders Equity
Accounts
$ 82,800
payable ...................................................
Note
15,180
payable .........................................................
Capital
509,220
stock ..........................................................
Retained
82,800
earnings ..................................................
Total liabilities and stockholders
$690,000
equity ...................
The company is in the process of preparing a budget for June and has assembled
the following data:
a. Sales are budgeted at $268,000 for June. Of these sales, $75,000 will be for cash;
the remainder will be credit sales. One-half of a months credit sales are collected
in the month the sales are made, and the remainder is collected the following
month. All of the May 31 accounts receivable will be collected in June.
b. Purchases of inventory are expected to total $196,000 during June. These
purchases will all be on account. Fifty percent of all inventory purchases are paid
for in the month of purchase; the remainder are paid in the following month. All
of the May 31 accounts payable to suppliers will be paid during June.
c. The June 30 inventory balance is budgeted at $40,000.
d. Selling and administrative expenses for June are budgeted at $30,000, exclusive
of depreciation. These expenses will be paid in cash. Depreciation is budgeted at
$4,000 for the month.
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Chapter 7 Alternate Problems

e. The note payable on the May 31 balance sheet will be paid during June. The
companys interest expense for June (on all borrowing) will be $600, which will be
paid in cash.
f. New warehouse equipment costing $8,000 will be purchased for cash during June.
g. During June, the company will borrow $21,000 from its bank by giving a new note
payable to the bank for that amount. The new note will be due in one year.
Required:
1. Prepare a cash budget for June. Support your budget with a schedule of expected
cash collections from sales and a schedule of expected cash disbursements for
inventory purchases.
2. Prepare a budgeted income statement for June. Use the absorption costing
income statement format as shown in Schedule 9.
3. Prepare a budgeted balance sheet as of June 30.

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7-8

Introduction to Managerial Accounting, 6th edition

PROBLEM 721BSchedule of Expected Cash Collections; Cash Budget [LO2,

LO8]
CHECK FIGURE
(1) July: $264,400
(2) July 31 cash balance: $3,400
Faces Au Natural Corp., a distributor of natural cosmetics, is ready to begin its third
quarter, in which peak sales occur. The company has requested a $52,000, 90-day
loan from its bank to help meet cash requirements during the quarter. Because the
company has experienced difficulty in paying off its loans in the past, the banks
loan officer has asked the company to prepare a cash budget for the quarter. In
response to this request, the following data have been assembled:
a. On July 1, the beginning of the third quarter, the company will have a cash
balance of $42,000.
b. Actual sales for the last two months and budgeted sales for the third quarter
follow (all sales are on account):
May (actual)
June (actual)
July (budgeted)
August (budgeted)
September
(budgeted)

$330,000
$290,000
$330,000
$490,000
$330,000

Past experience shows that 20% of a months sales are collected in the month of
sale, 65% in the month following sale, and 3% in the second month following
sale. The remainder is uncollectible.
c. Budgeted merchandise purchases and budgeted expenses for the third quarter
are given below:

Merchandise
purchases
Salaries and wages
Advertising
Rent payments
Depreciation

July

August

$161,00
0
$68,000
$70,000
$28,000
$35,000

$151,00
0
$68,000
$80,000
$28,000
$35,000

Septemb
er
$161,000
$58,000
$90,000
$28,000
$35,000

Merchandise purchases are paid in full during the month following purchase.
Accounts payable for merchandise purchases on June 30, which will be paid
during July, total $166,000.
d. Equipment costing $23,000 will be purchased for cash during July.
e. In preparing the cash budget, assume that the $52,000 loan will be made in July
and repaid in September. Interest on the loan will total $1,900.
Required:
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Chapter 7 Alternate Problems

1. Prepare a schedule of expected cash collections for July, August, and September
and for the quarter in total.
2. Prepare a cash budget, by month and in total, for the third quarter.
3. If the company needs a minimum cash balance of $20,000 to start each month,
can the loan be repaid as planned? Explain.

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Introduction to Managerial Accounting, 6th edition

PROBLEM 722BSchedule of Expected Cash Collections; Cash Budget [LO2,

LO8]
CHECK FIGURE
(1) May: $217,480
(2) May ending cash balance: $20,520
Madeleine Bohne, president of the retailer Bohne Products, has just approached the
companys bank with a request for a $34,000, 90-day loan. The purpose of the loan
is to assist the company in acquiring inventories in support of peak April sales.
Because the company has had some difficulty in paying off its loans in the past, the
loan officer has asked for a cash budget to help determine whether the loan should
be made. The following data are available for the months AprilJune, during which
the loan will be used:
a. On April 1, the start of the loan period, the cash balance will be $29,000.
Accounts receivable on April 1 will total $135,000, of which $127,500 will be
collected during April and $5,000 will be collected during May. The remainder will
be uncollectible.
b. Past experience shows that 19% of a months sales are collected in the month of
sale, 74% in the month following sale, and 4% in the second month following
sale. The other 3% represents 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
$206,000
$119,500
$9,000
$13,300
$71,500
$8,600
$9,600

May
$316,000
$169,500
$9,000
$13,300
$74,200

$9,600

June
$346,000
$149,500
$8,000
$13,300
$57,200

$9,600

c. Merchandise purchases are paid in full during the month following purchase.
Accounts payable for merchandise purchases on March 31, which will be paid
during April, total $108,200.
d. In preparing the cash budget, assume that the $34,000 loan will be made in April
and repaid in June. Interest on the loan will total $820.
Required:
1. Prepare a schedule of expected cash collections for April, May, and June and for
the three months in total.
2. Prepare a cash budget, by month and in total, for the three-month period.
3. If the company needs a minimum cash balance of $20,000 to start each month,
can the loan be repaid as planned? Explain.

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Chapter 7 Alternate Problems

PROBLEM 723BCash Budget with Supporting Schedules [LO2, LO4, LO7,

LO8]
CHECK FIGURE
(1a) Third quarter cash collections: $489,000
(3) Third quarter ending cash balance: $38,500
The president of Vacuity, Inc., has just approached the companys bank seeking
short-term financing for the coming year, Year 2. Vacuity is a distributor of
commercial vacuum cleaners. The bank has stated that the loan request must be
accompanied by a detailed cash budget that shows the quarters in which financing
will be needed, as well as the amounts that will be needed and the quarters in
which repayments can be made. To provide this information for the bank, the
president has directed that the following data be gathered from which a cash
budget can be prepared:
a. Budgeted sales and merchandise purchases for Year 2, as well as actual sales and
purchases for the last quarter of Year 1, are as follows:
Sales
Year 1:
Fourth quarter
actual ...................
Year 2:
First quarter
estimated .................
Second quarter
estimated ............
Third quarter
estimated ...............
Fourth quarter
estimated..............

$250,00
0
$350,0
00
$450,00
0
$550,00
0
$430,00
0

Merchandi
se
Purchases
$150,000
$230,000
$280,000
$340,000
$210,000

b. The company typically collects 48% of a quarters sales before the quarter ends
and another 50% in the following quarter. The remainder is uncollectible. This
pattern of collections is now being experienced in the actual data for the Year 1
fourth quarter.
c. Some 20% of a quarters merchandise purchases are paid for within the quarter.
The remainder is paid in the following quarter.
d. Selling and administrative expenses for Year 2 are budgeted at $85,000 per
quarter plus 10% of sales. Of the fixed amount, $15,000 each quarter is
depreciation.
e. The company will pay $10,000 in cash dividends each quarter.
f. Land purchases will be made as follows during the year: $86,000 in the second
quarter and $47,500 in the third quarter.
g. The Cash account contained $26,000 at the end of Year 1. The company must
maintain a minimum cash balance of at least $24,000.
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Introduction to Managerial Accounting, 6th edition

h. The company has an agreement with a local bank that allows the company to
borrow in increments of $10,000 at the beginning of each quarter, up to a total
loan balance of $100,000. The interest rate on these loans is 1% per month, and
for simplicity, we will assume that interest is not compounded. The company
would, as far as it is able, repay the loan plus accumulated interest at the end of
the year.
i. At present, the company has no loans outstanding.
Required:
1. Prepare the following, by quarter and in total, for Year 2:
a. A schedule of expected cash collections on sales.
b. A schedule of expected cash disbursements for merchandise purchases.
2. Compute the expected cash disbursements for selling and administrative
expenses, by quarter and in total, for Year 2.
3. Prepare a cash budget by quarter and in total for Year 2.

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Chapter 7 Alternate Problems

PROBLEM 724BBehavioral Aspects of Budgeting [LO1]

There is no alternative problem.

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Introduction to Managerial Accounting, 6th edition

PROBLEM 725BCompleting a Master Budget [LO2, LO4, LO7, LO8, LO9,

LO10]
CHECK FIGURE
(2) May purchases: $52,640
(4) May 31 cash balance: $5,600
The following data relate to the operations of Dillinger Company, a wholesale
distributor of consumer goods:
Current assets as of March 31:
Cash
$10,500
Accounts receivable
$21,000
Inventory
$10,080
Buildings and equipment
(net)
$140,000
Accounts payable
$36,500
Capital stock
$40,000
Retained earnings
$105,080
a.Gross margin is 30% of sales.
b.Actual and budgeted sales data:
March (actual)
April
May
June
July

$70,000
$72,000
$73,000
$84,000
$80,000

c. Sales are 70% for cash and 30% on credit. Credit sales are collected in the
month following sale. The accounts receivable at March 31 are the result of
March credit sales.
d.Each months ending inventory should equal 20% of the following months
budgeted cost of goods sold.
e.25% of a months inventory purchases are paid for in the month of purchase;
the remainder is paid for in the following month. The accounts payable at March
31 are a result of March purchases of inventory.
f. Monthly expenses are as follows: salaries and wages $12,500; rent, $3,600 per
month; other expenses (excluding depreciation), 8% of sales. Assume that these
expenses are paid monthly. Depreciation is $1,000 per month (includes
depreciation on new assets).
g.Equipment costing $9,000 will be purchased for cash in April.
h.The company must maintain a minimum cash balance of $5,000. An open line
of credit is available at a local bank. All borrowing is done at the beginning of a
month, and all repayments are made at the end of a month; borrowing must be
in multiples of $1,000. The annual interest rate is 12%. Interest is paid only at
the time of repayment of principal; figure interest on whole months (1/12, 2/12,
and so forth).

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Chapter 7 Alternate Problems

Required:
Using the above data:
1.Complete the following schedule:
Schedule of Expected Cash Collections
April
May
June

Quarter

Cash sales
Credit sales
Total collections
2.Complete the following:
Merchandise Purchases Budget
April
May
June
Budgeted cost of goods
sold*
$50,400 $51,100
Add desired ending
inventory
10,220
Total needs
60,620
Less beginning inventory
10,080
Required: purchases
$50,540
*For April sales: $72,000 sales 70% cost ratio = $50,400
$51,100 20% = $10,220

Quarter

Schedule of Expected Cash DisbursementsMerchandise

Purchases
April
May
June
Quarter
March purchases
$36,500
$36,500
April purchases
12,635 $37,905
50,540
May purchases
June purchases
Total disbursements
$49,135
3.Complete the following:
Schedule of Expected Cash DisbursementsSelling and
Administrative Expenses
April
May
June
Quarter
Salaries and wages
$12,500
Rent
3,600
Other expenses
5,760
Total disbursements
$21,860
4.Complete the following cash budget:
Cash Budget
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Introduction to Managerial Accounting, 6th edition

Cash balance, beginning

Add cash collections
Total cash available
Less cash disbursements
For inventory
For expenses
For equipment
Total cash disbursements
Excess (deficiency) of cash
Financing:
Etc.

April
$10,500
71,400
81,900

May

June

Quarter

49,135
21,860
9,000
79,995
1,905

5.Prepare an absorption costing income statement similar to Schedule 9 for the

quarter ending June 30. (Use the functional format in preparing your income
statement, as shown in Schedule 9 in the text.)
6.Prepare a balance sheet as of June 30.

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Chapter 7 Alternate Problems

PROBLEM 726BCompleting a Master Budget [LO2, LO4, LO7, LO8, LO9,

LO10]
CHECK FIGURE
(2a) February purchases: $62,244.00
(3) February total disbursements: $58,275.00
Hancock Company, a merchandising company, prepares its master budget on a
quarterly basis. The following data have been assembled to assist in preparation of
the master budget for the second quarter.
a. As of December 31 (the end of the prior quarter), the companys balance sheet
showed the following account balances:
Cash
Accounts receivable
Inventory
Buildings and equipment
(net)
Accounts payable

$
6,700
36,900
11,130
120,000

Common stock
Retained earnings
$174,73
0

$
32,880
100,000
41,85
0
$174,73
0

b. Actual and budgeted sales are as follows:

December
(actual)
January
February
March
April

$61,500
$79,500
$88,800
$89,400
$58,100

c. Sales are 40% for cash and 60% on credit. All payments on credit sales are
collected in the month following the sale. The accounts receivable at December
31 are a result of December credit sales.
d. The companys gross margin percentage is 30% of sales. (In other words, cost of
goods sold is 70% of sales.)
e. Each months ending inventory should equal 20% of the following month's
budgeted cost of goods sold.
f. One-quarter of a months 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.
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Introduction to Managerial Accounting, 6th edition

g. Monthly expenses are as follows: commissions, $12,150; rent, $2,650; other

expenses (excluding depreciation), 8% of sales. Assume that these expenses are
paid monthly. Depreciation is $2,550 for the quarter and includes depreciation on
new assets acquired during the quarter.
g. Equipment will be acquired for cash: $3,830 in January and $8,100 in February.
h. 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 interest is not compounded. The
company would, as far as it is able, repay the loan plus accumulated interest at
the end of the quarter.
Required:
Using the data above, complete the following statements and schedules for the
second quarter:
1. Schedule of expected cash collections:
January
Cash sales
Credit sales
Total collections

Februar
y

March

Total

January
February
$55,650.0 * $62,160.0
0
0
12,432.0
0
68,082.00
11,130.0
0
$56,952.0
0

March

Total

$31,800.
00
36,900.0
0
$68,700.
00

2. a. Merchandise purchases budget:

Budgeted cost of goods

Add desired ending
inventory
Total needs
Less beginning inventory
Required purchases

*$79,500.00 sales 70% = $55,650.00.

$88,800.00 70% 20% = $12,432.00.
b. Schedule of expected cash disbursements for merchandise purchases:
December purchases
January purchases

January
February
$32,880.0 *
0
14,238.00
$42,714.0

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Chapter 7 Alternate Problems

March

Total
$32,880.
00
56,952.0

0
February purchases
March purchases
Total cash disbursements for
purchases

0.00
0.0
0
$47,118.0
0

*Beginning balance of the accounts payable.

3. Schedule of expected cash disbursements for selling and administrative
expenses:

Commissions
Rent
Other expenses
Total cash disbursements for
selling
and administrative expenses

January
$12,150.0
0
2,650.00
6,360.0
0

February

March

Total

Februar
y

March

Total

$21,160.0
0

4. Cash budget:
January
Cash balance, beginning
Add cash collections
Total cash available
Less cash disbursements:
For inventory
For operating expenses
For equipment
Total cash disbursements
Excess (deficiency) of cash
Financing
Etc.

$
6,700.00
68,700.0
0
75,400.0
0
47,118.0
0
21,160.0
0
3,830.0
0
72,108.0
0
3,292.00

5. Prepare an absorption costing income statement for the quarter ending March 31
as shown in Schedule 9 in the chapter.
6. Prepare a balance sheet as of March 31.
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Introduction to Managerial Accounting, 6th edition