Question

9 The following data relate to the operations of Andros Com Company, a magazine distributor Current assets as of March 31: Cash Accounts receivable S26,000 S90,000 Buildings and equipment (net). S150,000 Accounts payableS102,500 Capital stock... S50,000 $148,000 The gross margin is 25% of sales. a. b. Actual and budgeted sales data: March (actual $200,000 $230,000 May. $240,000 June...$250,000 July260,000 April Sales are 55% for cash and 45% on credit. Credit sales are collected in the month following sale The accounts receivable at March 31 are the result of March credit sales. Each month's ending inventory should equal 20% of the following month's sales budgeted cost of goods sold. 40% of a month's inventory purchases is paid for in the month of purchase; the remainder is paid for in the following month. The accounts payable at March 31 are a result of March purchases of inventory Monthly expenses are as follows: commissions, $30,400; rent, $11,000; other expenses (excluding depreciation), 4% of sales. These expenses are paid monthly. Depreciation is $7,000 per month and includes depreciation on new assets. c. d. e, f. g. Equipment costing $10,000 will be purchased for cash in April. j. Management wants to maintain a minimum cash balance of $20,000. The company has arn agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total of $20,000. The interest rate on these loans is 1% per month and for simplicity we will assume the interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter

Answer 1

1) Schedule of expected Cash Collections

	Apr	May	Jun	Quarter
Cash Sales (55% of Sales)	$126500	132000	137500	396000
Credit Sales recovered (previous month's credit sales)	90000	103500	108000	301500
Total Collections	$216500	235500	245500	697500

2) Merchandise Purchase Budget

	Apr	May	Jun	Quarter
Budgeted cost of goods sold	172500	180000	187500	540000
Add desired ending inventory	36000	37500	39000	39000
Total needs	208500	217500	226500	579000
Less Beginning inventory	34500	36000	37500	108000
Required purchases	174000	181500	189000	544500

Calculation of budgeted Cost of goods sold :

May : $240000*75% = $180000

June : $250000*75% = $187500

Calculation of ending inventory :

May : $187500*20% = $37500

June : $260000*75%*20% = $39000

Schedule of expected cash disbursement-Merchandise Purchase

	Apr	May	Jun	Quarter
March Purchases	102500			102500
April Purchases	69600	104400		174000
May Purchases		72600	108900	181500
June Purchases			75600	75600
Total Disbursements	172100	177000	184500	533600

Total Disbursements = 40% of the current month's purchases + 60% of the previous month's Purchases

3) Schedule of expected cash disbursement-Selling & Administrative Expenses

	Apr	May	Jun	Quarter
Commission	30400	30400	30400	91200
Rent	11000	11000	11000	33000
Other Expenses	9200	9200	9200	27600
Total disbursements	50600	50600	50600	151800