PR 21-4A - accounting homework answer PDF

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Prob. 21–4A (FIN MAN); Prob. 7–4A (MAN) 1. Bridgeport Housewares Inc. Cash Budget For the Three Months Ending November 30 September

October

November

$ 30,000

$ 31,500

Estimated cash receipts from:

Cash sales a Collection of accounts receivable Total cash receipts

$ 25,000 228,000

229,500

$253,000

$259,500

$ 288,000

256,500

$120,000

$124,000

$ 134,000

42,000

48,000

51,000

Less estimated cash payments for: b

Manufacturing costs

Selling and administrative expenses Capital expenditures

200,000

Other purposes: Income tax

55,000

Dividends

25,000

Total cash payments

$162,000

$227,000

$ 410,000

Cash increase or (decrease) Plus cash balance at beginning of month

$ 91,000 40,000

$ 32,500 131,000

$(122,000) 163,500

Cash balance at end of month

$131,000

$163,500

$ 41,500

Less minimum cash balance Excess or (deficiency)

(50,000) $ 81,000

(50,000) $113,500

(50,000) $

(8,500)

Prob. 21–4A (FIN MAN); Prob. 7–4A (MAN) (Concluded) Computations: a

Collections of accounts receivable: July

September

October

2

sales……………………………………

September

168,000

2 3 4 5 6 b

3

$ 72,000

4

sales………………………………… $228,000

5

157,500

$ 67,500 6 189,000

$229,500

$256,500

sales……………………………………

Total…………………………………………… 1

November

$ 60,000

sales…………………………………………

August

October

1

$200,000 × 30% = $60,000 $240,000 × 70% = $168,000 $240,000 × 30% = $72,000 $250,000 × 90% × 70% = $157,500 $250,000 × 90% × 30% = $67,500

$300,000 × 90% × 70% = $189,000 P ayments for manufacturing costs: Payment of accounts c payable, beginning of month balanc …………………………… e d Payment of current month’s cost …………… Total…………………………………………… c

September

October

November

$ 40,000 80,000

$ 20,000 104,000

$ 26,000 108,000

$120,000

$124,000

$134,000

Accounts payable, September 1 balance = $40,000 ($150,000 – $50,000) × 20% = $20,000 ($180,000 – $50,000) × 20% = $26,000

d

($150,000 – $50,000) × 80% = $80,000 ($180,000 – $50,000) × 80% = $104,000 ($185,000 – $50,000) × 80% = $108,000

2.

The budget indicates that the minimum cash balance will not be maintained in November. This is due to the capital expenditures requiring significant cash outflows during this month. This situation can be corrected by borrowing and/or by the sale of the marketable securities, if they are held for such purposes. At the end of September and October, the cash balance will exceed the minimum desired balance, and the excess could be considered for temporary investment....