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Chapter 22: Q16SE (page 1231)

Preparing a financial budget—schedule of cash payments

Jefferson Company has budgeted purchases of merchandise inventory of \(457,500 in January and \)533,250 in February. Assume Jefferson pays for inventory purchases 70% in the month of purchase and 30% in the month after purchase. The Accounts Payable balance on December 31 is $98,275. Prepare a schedule of cash payments for purchases for January and February.

Short Answer

Expert verified

Answer

Total cash receipts from the customers is $535,180 in the month of January and $450,220 in the month of February.

Step by step solution

01

Meaning of schedule of cash receipts

The schedule of cash receipts is prepared to record the cash received from the customers.

02

Preparation of schedule of cash receipts

Particulars

January

February

Total budgeted merchandise inventory

$457,500

$533,250

Cash payments:



70 % in the month of purchase

$320,250

$373,375

30% in the month after purchase

$98,275

$457,500*30% =$137,250

Total cash payments

$418,525

$510,625

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Most popular questions from this chapter

Preparing an operating budget—direct materials, direct labor, and manufacturing overhead budgets

Grady, Inc. manufactures model airplane kits and projects production at 650, 500, 450, and 600 kits for the next four quarters. Direct materials are 4 ounces of plastic per kit and the plastic costs \(1 per ounce. Indirect materials are considered insignificant and are not included in the budgeting process. Beginning Raw Materials Inventory is 850 ounces, and the company desires to end each quarter with 10% of the materials needed for the next quarter’s production. Grady desires a balance of 200 ounces in Raw Materials Inventory at the end of the fourth quarter. Each kit requires 0.10 hours of direct labor at an average cost of \)10 per hour. Manufacturing overhead is allocated using direct labor hours as the allocation base. Variable overhead is \(0.20 per kit, and fixed overhead is \)165 per quarter. Prepare Grady’s direct materials budget, direct labor budget, and manufacturing overhead budget for the year. Round the direct labor hours needed for production, budgeted overhead costs, and predetermined overhead allocation rate to two decimal places. Round other amounts to the nearest whole number.

How is benchmarking beneficial?

Preparing a financial budget—cash budget

Wilson Company has \(11,000 in cash on hand on January 1 and has collected the following budget data:

January February Sales \) 1,400,000 \( 710,000 Cash receipts from customers 851,420 871,800 Cash payments for merchandise inventory 561,100 532,310

Assume Wilson has cash payments for selling and administrative expenses including salaries of \)55,000 plus commissions of 2% of sales, all paid in the month of sale. The company requires a minimum cash balance of $8,500. Prepare a cash budget for January and February. Will Wilson need to borrow cash by the end of February?

Preparing a financial budget—budgeted 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’ 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.)

Match the budget types to the definitions.

Budget Types Definitions

5. Financial a. Includes sales, production, and cost of goods sold budgets

6. Flexible b. Long-term budgets

7. Operating c. Includes only one level of sales volume

8. Operational d. Includes various levels of sales volumes

9. Static e. Short-term budgets

10. Strategic f. Includes the budgeted financial statements
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