1)Silver Company makes a product that is very popular as a Mother’s Day gift. Thus, peak…

1)Silver Company makes a product that is very popular as a
Mother’s Day gift. Thus, peak sales occur in May of each year, as
shown in the company’s sales budget for the second quarter given
below:
April May June Total Budgeted sales (all on account)
$300,000 $500,000 $200,000 $1,000,000
From past experience, the company has learned that 20% of a
month’s sales are collected in the month of sale, another 70% are
collected in the month following sale, and the remaining 10% are
collected in the second month following sale. Bad debts are
negligible and can be ignored. February sales totaled $230,000, and
March sales totaled $260,000.
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?
2) Down Under Products, Ltd., of Australia has budgeted sales of
its popular boomerang for the next four months as follows:

Unit Sales

April

50,000

May

75,000

June

90,000

July

80,000

The company is now in the process of preparing a production budget
for the second quarter. Past experience has shown that end-of-month
inventory levels must equal 10% of the following month’s unit
sales. The inventory at the end of March was 5,000 units.
Required:
Prepare a production budget by month and in total, for the
second quarter.
3) Three grams of musk oil are required for each bottle of Mink
Caress, a very popular perfume made by a small company in western
Siberia. The cost of the musk oil is $1.50 per gram. Budgeted
production of Mink Caress is given below by quarters for Year 2 and
for the first quarter of Year 3:

Year 2

Year 3

First
Second
Third
Fourth

First

Budgeted production, in bottles
60,000
90,000
150,000
100,000

70,000

Musk oil has become so popular as a perfume ingredient that it
has become necessary to carry large inventories as a precaution
against stock-outs. For this reason, the inventory of musk oil at
the end of a quarter must be equal to 20% of the following
quarter’s production needs. Some 36,000 grams of musk oil will be
on hand to start the first quarter of Year 2.
Required:
Prepare a direct materials budget for musk oil, by quarter and
in total, for Year 2.
4)Minden Company is a wholesale distributor of premium European
chocolates. The company’s balance sheet as of April 30 is given
below:

Minden Company

Balance Sheet

April 30

Assets

Cash
$
9,000

Accounts receivable

54,000

Inventory

30,000

Buildings and equipment, net of depreciation

207,000

Total assets
$
300,000

Liabilities and Stockholders’
Equity

Accounts payable
$
63,000

Note payable

14,500

Common stock

180,000

Retained earnings

42,500

Total liabilities and stockholders’ equity
$
300,000

The company is in the process of preparing a budget for May and
has assembled the following data:

Sales are budgeted at $200,000 for May. Of these sales, $60,000
will be for cash; the remainder will be credit sales. One-half of a
month’s credit sales are collected in the month the sales are made,
and the remainder is collected in the following month. All of the
April 30 accounts receivable will be collected in May.

Purchases of inventory are expected to total $120,000 during
May. These purchases will all be on account. Forty percent of all
purchases are paid for in the month of purchase; the remainder are
paid in the following month. All of the April 30 accounts payable
to suppliers will be paid during May.

The May 31 inventory balance is budgeted at $40,000.

Selling and administrative expenses for May are budgeted at
$72,000, exclusive of depreciation. These expenses will be paid in
cash. Depreciation is budgeted at $2,000 for the month.

The note payable on the April 30 balance sheet will be paid
during May, with $100 in interest. (All of the interest relates to
May.)

New refrigerating equipment costing $6,500 will be purchased for
cash during May.

During May, the company will borrow $20,000 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. Calculate the expected cash collections for May.
2. Calculate the expected cash disbursements for merchandise
purchases for May.
3. Prepare a cash budget for May.
4. Prepare a budgeted income statement for May.
5. Prepare a budgeted balance sheet as of May 31.
5) 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 company’s operations:

The cash balance on December 1 is $40,000.

Actual sales for October and November and expected sales for
December are as follows:

October
November
December

Cash sales
$
65,000
$
70,000
$
83,000

Sales on account
$
400,000
$
525,000
$
600,000

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 $280,000 for December. Thirty
percent of a month’s inventory purchases are paid during the month
of purchase. The accounts payable remaining from November’s
inventory purchases total $161,000, all of which will be paid in
December.

Selling and administrative expenses are budgeted at $430,000 for
December. Of this amount, $50,000 is for depreciation.

A new web server for the Marketing Department costing $76,000
will be purchased for cash during December, and dividends totaling
$9,000 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 company’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.

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