Question

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Winter 2020 Budget Planning Following is selected information relating to the operations of Pocketchange Company, a tile distributor September 30, 2020 - Trial Balance information $ ................................. Accounts receivable..... ......... Inventory Plant and equipment, net of Acc. Dep. Accounts payable.............................. Capital stock......................... Retained earnings.... . ....... 8.000 24.800 39.600 428,200 24,050 150,000 326,550 500,600 $ 500,600 $ a. Actual and budgeted sales data: September (actual)................... October.... November................................ December................... .. January... BERBEDRE 62.000 66,000 80,000 94,000 48.000 b. Gross profit is 25% of sales (or 75% Cost of Goods Sold %). C. Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at September 30 are a result of the September's credit sales d. At the end of each month, inventory on hand is to be equal to 80% of the following month's sales needs, stated at cost. e. One-half of a month's inventory purchases is paid in the month of purchase the other half is paid in the following month. The accounts payable at September 30 are a result of September purchases of inventory. 1 Monthly expenses are as follows: salaries and wages, 12% of sales, rent, $2,500 per month; other expenses (excluding depreciation). 6% of sales. Assume that these expenses are paid monthly. Depreciation is $1,300 per month (includes depreciation on new assets) Equipment costing $7,000 will be purchased for cash in the October and another $5,000 in November h. The company must maintain a minimum cash balance of $5,000. An open line of credit is available at a local bank. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month: borrowing and repayments must be made in multiples of $1.000. The annual interest rate is 12%. Interest is paid only at the time of repayment of principles figure interest on the whole month (2/12, 3/12, and so forth). Any unpaid interest is accrued at the end of the quarter. Budget(excel)

Answer 1

Ans.1

Schedule of Expected Cash Collection
	Oct	Nov	Dec	Quarter
Cash Sales	39600	48000	56400	144000
Credit Sales	26400	32000	37600	37600
Total Collection	66000	80000	94000	181600

Ans. 2

	Inventory Purchases Budget
	Oct	Nov	Dec	Quarter
Budgeted Cost of Goods Sold	49500	60000	70500	180000
Add: Desired Ending Inventory	48000	56400	28800	133200
Total Needs	97500	116400	99300	313200
Less: Beginning Inventory	39600	57900	58500	156000
Required Purchases	57900	58500	40800	157200

Schedule of Expected Cash Disbursements Purchases
	Oct	Nov	Dec	Quarter
Sep Purchases	24050
Oct Purchases	28950	28950
Nov Purchases		29250	29250	29250
Dec Purchases			20400	78600
Total Disbursements for Purchases	53000	58200	49650	107850

Ans.3

Schedule of Expected Cash Disbursements- Operating Expenses
	Oct	Nov	Dec	Quarter
Salaries & Wages	7920	9600	11280	28800
Rent	2500	2500	2500	7500
Other Expenses	3960	4800	5640	14400
Total Disbursements	14380	16900	19420	50700

Ans.4

Cash Budget- Cash Receipts & Disbursements
Cash Balance- Beginning	8000	5020	5320
Add: Cash Collections	64400	74400	88400
Total cash Available	72400	79420	93720
Less: Cash Disbursements
For Inventory	53000	58200	49650
For Expenses	14380	16900	19420
For Equipment	7000	5000	0
Total cash disbursements	74380	80100	69070
Expected Cash Balance (Overdraft)	(1980)	(680)	24650
Financing:
Borrowing (at beginning)	7000	6000	0
Repayments (at end)	0	0	13000
Interest (at 12% per year)	0	0	2750
Total Financing	7000	6000	15750
Cash Balance, Ending	5020	5320	8900

Pocket Change Company
Income Statement
For the quarter ended December 31, 2020
Sales		240000
Beginning Inventory	39600
Purchases	157200
Goods available	196800
Ending Inventory	28800
Cost of Goods Sold		168000
Gross Margin		72000
Operating Expenses:
Salaries		28800
Rent		7500
Depreciation		3900
Other Expenses		14400
Net Operating Income		17400
Less: Interest Expenses		2750
Net Income		14650

Pocket Change Company
Balance Sheet
December 31, 2017
Assets
Cash (Part 4)		8900
Accounts Receivable		37600
Inventory (Part 2)		28800
Total Current Assets		75300
Fixed Assets- net of accumulated depreciation		436300
Total Assets		511600
Liabilities
Accounts Payable		20400
Notes Payable		0
Interest Payable		0
Total Liabilities		20400
Stockholder's Equity
Capital Stock	150000
Retained Earnings	341200
Total Liabilities & Equity		511600