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Chapter 22: Q28E (page 1235)

Preparing the financial budget鈥攃ash budget

Use the original schedule of cash receipts completed in Exercise E22-26, Requirement 1, and the schedule of cash payments completed in Exercise E22-27 to complete a cash budget for Marcel Company for January, February, and March.

Additional information: Marcel鈥檚 beginning cash balance is \(5,000, and Marcel desires to maintain a minimum ending cash balance of \)5,000. Marcel borrows cash as needed at the beginning of each month in increments of \(1,000 and repays the amounts borrowed in increments of \)1,000 at the beginning of months when excess cash is available. The interest rate on amounts borrowed is 8% per year. Interest is paid at the beginning of the month on the outstanding balance from the previous month.

Short Answer

Expert verified

Answer

The balances in prepaid property taxes, accounts payable, and utilities payable are $3,330, $4,800, $900.

Step by step solution

01

Preparation of cash budget

Particulars

January

February

March

Beginning cash balance

$5,000

$5,380

$5,010

Cash receipts

$8,960

$12,080

$11,340

Cash payments:




Direct materials

$0

$3,100

$3,500

Direct labor cost

$3,300

$3,500

$3,600

Utilities for plant

$0

$650

$650

Property taxes on plant

$200*12 =$2,400

-

-

Utilities for office

$0

$250

$250

Property taxes on office

$170*12 =$2,040

-

-

Office salaries

$3,500

$3,500

$3,500

Total cash payments

$14,340

$14,500

$16,300

Ending cash balance before financing

(380)

$2,960

$50

Minimum cash balance desired

($5,000)

($5,000)

($5,000)

Projected cash excess (deficiency)

($5,380)

($2,960)

($4,950)

Financing (borrowing)

$5,380

$2,050

$4,950

Ending cash balance

$5,380

$5,010

$5,000

02

Calculation of balances in prepaid property taxes, accounts payable, and utilities payable.

Prepaid property taxes = (tax on office+ tax on plant)*9

= ($200+$170)*9

= $3,330

Accounts payable = $ 4,800

Utilities payable = Utilities on office+ utilities on plant

= $650 + $250

= $900

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Most popular questions from this chapter

Preparing a financial budget鈥攂udgeted balance sheet

Use the following June actual ending balances and July 31, 2018, budgeted amounts for Omas to prepare a budgeted balance sheet for July 31, 2018.

a. June 30 Merchandise Inventory balance, \(17,770

b. July purchase of Merchandise Inventory, \)4,400, paid in cash

c. July payments of Accounts Payable, \(8,400

d. June 30 Accounts Payable balance, \)10,700

e. June 30 Furniture and Fixtures balance, \(34,100; Accumulated Depreciation balance, \)29,880

f. June 30 total stockholders鈥� equity balance, \(28,020

g. July Depreciation Expense, \)500

h. Cost of Goods Sold, 60% of sales

i. Other July expenses, including income tax, \(2,000, paid in cash

j. June 30 Cash balance, \)11,600

k. July budgeted sales, all on account, \(12,600

l. June 30 Accounts Receivable balance, \)5,130

m. July cash receipts from collections on account, $14,700

(Hint: It may be helpful to trace the effects of each transaction on the accounting equation to determine the ending balance of each account.)

Question: Preparing a financial budget鈥攕chedule of cash receipts, schedule cash payments, cash budget

Baxter Company鈥檚 budget committee provides the following information: December 31, 2017, account balances:

1. Prepare the schedule of cash receipts from customers for January and February 2018. Assume cash receipts are 80% in the month of the sale and 20% in the month following the sale.

2. Prepare the schedule of cash payments for purchases for January and February 2018. Assume purchases are paid 60% in the month of purchase and 40% in the month following the purchase.

3. Prepare the schedule of cash payments for selling and administrative expenses for January and February 2018. Assume 40% of the accrual for Salaries and Commissions Payable is for commissions and 60% is for salaries. The December 31 balance will be paid in January. Salaries and commissions are paid 30% in the month incurred and 70% in the following month. Rent and income tax expenses are paid as incurred. Insurance expense is an expiration of the prepaid amount.

4. Prepare the cash budget for January and February 2018. Assume no financing took place.

Preparing a financial budget鈥攕chedule of cash receipts

Victors expects total sales of \(702,000 for January and \)349,000 for February. Assume that Victor'ssales are collected as follows:

50% in the month of the sale

30% in the month after the sale

16% two months after the sale

4% never collected

November sales totaled \(388,000, and December sales were \)407,000. Prepare a schedule of cash receipts from customers for January and February. Round answers to the nearest dollar.

Preparing the financial budget鈥攂udgeted balance sheet

Barker, Inc. has the following balance sheet at December 31, 2018:

Barker projects the following transactions for 2019:

Sales on account, \(20,000

Cash receipts from customers from sales on account, \)17,600

Purchase of raw materials on account, \(7,000

Payments on account, \)3,500

Total cost of completed products, \(16,600, which includes the following:

Raw materials used, \)7,100

Direct labor costs incurred and paid, \(3,900

Manufacturing overhead costs incurred and paid, \)4,800

Depreciation on manufacturing equipment, \(800

Cost of goods sold, \)14,800

Selling and administrative costs incurred and paid, \(500

Purchase of equipment, paid in 2019, \)2,000

Prepare a budgeted balance sheet for Barker, Inc. for December 31, 2019. (Hint: It may be helpful to trace the effects of each transaction on the accounting equation to determine the ending balance of each account.)

Preparing a financial budget鈥攕chedule of cash payments

Marcel Company has the following projected costs for manufacturing and selling and administrative expenses:

January February March Direct materials purchases \( 3,100 \) 3,500 $ 4,800 Direct labor costs 3,300 3,500 3,600 Depreciation on plant 550 550 550 Utilities for plant 650 650 650 Property taxes on plant 200 200 200 Depreciation on office 550 550 550 Utilities for office 250 250 250 Property taxes on office 170 170 170 Office salaries 3,500 3,500 3,500

All costs are paid in month incurred except: direct materials, which are paid in the month following the purchase; utilities, which are paid in the month after incurred; and property taxes, which are prepaid for the year on January 2. The Accounts Payable and Utilities Payable accounts have a zero balance on January 1. Prepare a schedule of cash payments for Marcel for January, February, and March. Determine the balances in Prepaid Property Taxes, Accounts Payable, and Utilities Payable as of March 31.
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