Question

Problem 9-34 Relationships of the Master-Budget Components (LO 9-3, 9-5, 9-6) Badlands Inc. manufactures a household fan that sells for $20 per unit. All sales are on account, with 40 percent of sales collected in the month of sale and 60 percent collected in the following month. The data that follow were extracted from the company's accounting records. Badlands maintains a minimum cash balance of $22,000. Total payments in January 20x1 are budgeted at $220,000. • Aschedule of cash collections for January and February of 20x1 revealed the following receipts for the period: From December 31 accounts receivable From January sales From February sales Cash Receipts January February $114,000 100,000 $150,000 75,600 • March 20xt sales are expected to total 10,500'units. • Finished goods inventories are maintained at 30 percent of the following month's sales. • The December 31, 20x0, balance sheet revealed the following selected figures: cash, $23,000; accounts receivable, $114,000; and finished goods, $23,100. Required: 1. Determine the number of units that Badlands sold in December 20x0. 2. Compute the sales revenue for March 20x1. 3. Compute the total sales revenue to be reported on Badlands' budgeted income statement for the first quarter of 20x1. 4. Determine the accounts receivable balance to be reported on the March 31, 20x1, budgeted balance sheet. 5. Calculate the number of units in the December 31, 20x0, finished-goods inventory. 6. Calculate the number of units of finished goods to be manufactured in January 20x1. 7. Calculate the financing required in January, if any, to maintain the firm's minimum cash balance.

Answer 1

1.

December sales = Accounts receivables/[(1-0.3)   * Selling price per unit]

                                = 114000/(1-0.4)*20

                                = 9500 units

2.

March sales revenue= units sold in march * selling price per unit = 10500*20 = $ 210,000

3.

First quarter sales revenue          = jan sales + feb sales + mar sale =

                                                                = 100,000 + 150,000 + 75600/0.4 + 210,000

                                                                = 649,000

4.

March 31 accounts receivable balance = 210,000*60% = $ 126,000

5.

December 31 finished goods inventory = December closing inventory / Unit sales per unit                                                                                                              = 23100/20 = 1155

6.

Finished goods to be manufactured in January

= (Jan sales in units + closing inventory - opening inventory)

= (100,000+150,000)/20 + (75600/20) – 1155

= 12500+3780-1155

=15125 units

7.

Computation of financing required

Opening balance of cash	23000
+ Collections (114000 + 100,000)	214000
-Payments	220,000
Excess cash over payments	17000
Less: Minimum cash required	22000
Financing required	$ 5000