# accounting homework 4 questions

Question 1

Silver Company makes a product that is very popular as a Motherâ€™s Day gift. Thus, peak sales occur in May of each year, as shown in the companyâ€™s sales budget for the second quarter given below:

 April May June Total Budgeted sales (all on account) \$490,000 \$690,000 \$220,000 \$1,400,000

From past experience, the company has learned that 25% of a monthâ€™s sales are collected in the month of sale, another 60% are collected in the month following sale, and the remaining 15% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled \$420,000, and March sales totaled \$450,000.

Required:

1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

2. What is the accounts receivable balance on June 30th?

Question 2

Garden Depot is a retailer that is preparing its budget for the upcoming fiscal year. Management has prepared the following summary of its budgeted cash flows:

 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total cash receipts \$ 280,000 \$ 400,000 \$ 330,000 \$ 350,000 Total cash disbursements \$ 344,000 \$ 314,000 \$ 304,000 \$ 324,000

The companyâ€™s beginning cash balance for the upcoming fiscal year will be \$45,000. The company requires a minimum cash balance of \$10,000 and may borrow any amount needed from a local bank at a quarterly interest rate of 3%. The company may borrow any amount at the beginning of any quarter and may repay its loans, or any part of its loans, at the end of any quarter. Interest payments are due on any principal at the time it is repaid. For simplicity, assume that interest is not compounded.

Required:

Prepare the companyâ€™s cash budget for the upcoming fiscal year. (Repayments, and interest, should be indicated by a minus sign.)

Question 3

Required information

[The following information applies to the questions displayed below.]

Beech Corporation is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The companyâ€™s balance sheet as of June 30th is shown below:

 Beech Corporation Balance Sheet June 30 Assets Cash \$ 86,000 Accounts receivable 138,000 Inventory 75,000 Plant and equipment, net of depreciation 229,000 Total assets \$ 528,000 Liabilities and Stockholdersâ€™ Equity Accounts payable \$ 90,000 Common stock 351,000 Retained earnings 87,000 Total liabilities and stockholdersâ€™ equity \$ 528,000

• Estimated sales for July, August, September, and October will be \$400,000, \$420,000, \$410,000, and \$430,000, respectively.
• All sales are on credit and all credit sales are collected. Each monthâ€™s credit sales are collected 35% in the month of sale and 65% in the month following the sale. All of the accounts receivable at June 30 will be collected in July.
• Each monthâ€™s ending inventory must equal 25% of the cost of next monthâ€™s sales. The cost of goods sold is 75% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at June 30 will be paid in July.
• Monthly selling and administrative expenses are always \$56,000. Each month \$8,000 of this total amount is depreciation expense and the remaining \$48,000 relates to expenses that are paid in the month they are incurred.
• The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30.

Required:

1. Prepare a schedule of expected cash collections for July, August, and September. Also compute total cash collections for the quarter ended September 30.

2-a. Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30.

2-b. Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September. Also compute total cash disbursements for merchandise purchases for the quarter ended September 30.

3. Prepare an income statement for the quarter ended September 30.

4. Prepare a balance sheet as of September 30.

Question 4

You have been asked to prepare a December cash budget for Ashton Company, a distributor of exercise equipment. The following information is available about the companyâ€™s operations:

• The cash balance on December 1 is \$50,600.
• Actual sales for October and November and expected sales for December are as follows:
 October November December Cash sales \$ 74,400 \$ 86,000 \$ 85,000 Sales on account \$ 515,000 \$ 533,000 \$ 672,000

Sales on account are collected over a three-month period as follows: 20% collected in the month of sale, 60% collected in the month following sale, and 18% collected in the second month following sale. The remaining 2% is uncollectible.

• Purchases of inventory will total \$317,000 for December. Thirty percent of a monthâ€™s inventory purchases are paid during the month of purchase. The accounts payable remaining from Novemberâ€™s inventory purchases total \$190,000, all of which will be paid in December.
• Selling and administrative expenses are budgeted at \$526,000 for December. Of this amount, \$58,600 is for depreciation.
• A new web server for the Marketing Department costing \$78,000 will be purchased for cash during December, and dividends totaling \$15,500 will be paid during the month.
• The company maintains a minimum cash balance of \$20,000. An open line of credit is available from the companyâ€™s bank to increase its cash balance as needed.

Required:

1. Calculate the expected cash collections for December.

2. Calculate the expected cash disbursements for merchandise purchases for December.

3. Prepare a cash budget for December. Indicate in the financing section any borrowing that will be needed during the month. Assume that any interest will not be paid until the following month

1. Calculate the expected cash collections for December.

2. Calculate the expected cash disbursements for merchandise purchases for December.

 Total cash collections Total cash disbursements

Calculate the expected cash disbursements for merchandise purchases for December.

 Ashton Company Cash Budget For the Month of December Beginning cash balance Add collections from customers Total cash available Less cash disbursements: Payments to suppliers for inventory Selling and administrative expenses New web server Dividends paid Total cash disbursements Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayments Interest Total financing Ending cash balance