Problem 9-14 (45 minutes)

1. Schedule of expected cash collections:

Month
May

April
June
From accounts
receivable ..................... $141,000 $ 7,200
From April sales:
20% _ 200,000..............
40,000
75% _ 200,000..............
150,000
4% _ 200,000 ...............
$ 8,000
From May sales:
20% _ 300,000..............
60,000
75% _ 300,000..............
225,000
From June sales:
20% _ 250,000..............
50,000
Total cash collections ........ $181,000 $217,200 $283,000

Quarter
$148,200
40,000
150,000
8,000
60,000
225,000
50,000
$681,200

Problem 9-14 (continued)

2. Cash budget:
Cash balance,
beginning....................
Add receipts:
Collections from
customers ................
Total available ................
Less disbursements:
Merchandise
purchases.................
Payroll ........................
Lease payments...........
Advertising..................
Equipment purchases ...
Total disbursements........
Excess (deficiency) of
receipts over
disbursements .............
Financing:
Borrowings..................
Repayments ................
Interest ......................
Total financing ...............
Cash balance, ending

April

Month
May

June

Quarter

$ 26,000

$ 27,000

$ 20,200

$ 26,000

181,000
207,000

217,200
244,200

283,000
303,200

681,200
707,200

108,000
9,000
15,000
70,000
8,000
210,000

120,000
9,000
15,000
80,000

224,000

180,000
8,000
15,000
60,000

263,000

408,000
26,000
45,000
210,000
8,000
697,000

20,200

40,200

10,200

(3,000)
30,000

30,000
$ 27,000

(30,000)

(1,200)

(31,200)
$ 20,200 $ 9,000

30,000
(30,000)
(1,200)
(1,200)
$ 9,000

3. If the company needs a minimum cash balance of $20,000 to start each

month, the loan cannot be repaid in full by June 30. If the loan is repaid
in full, the cash balance will drop to only $9,000 on June 30, as shown
above. Some portion of the loan balance will have to be carried over to
July, at which time the cash inflow should be sufficient to complete
repayment.

Problem 9-16 (60 minutes)

1. The sales budget for the third quarter:

July
Aug.
Sept.
Quarter
Budgeted sales (pairs) ......
6,000
7,000
5,000
18,000
Selling price per pair .........
_ $50
_ $50
_ $50
_ $50
Total budgeted sales......... $300,000 $350,000 $250,000 $900,000
The schedule of expected cash collections from sales:

July

Aug.

Sept.

Quarter

Accounts receivable,
beginning balance.......... $130,000
$130,000
July sales:
$300,000 _ 40%, 50% ... 120,000 $150,000
270,000
August sales:
$350,000 _ 40%, 50% ...
140,000 $175,000 315,000
September sales:
$250,000 _ 40%............
100,000 100,000
Total cash collections ........ $250,000 $290,000 $275,000 $815,000
2. The production budget for July through October:
Budgeted sales (pairs) .......................
Add desired ending inventory .............
Total needs.......................................
Less beginning inventory....................
Required production (pairs) ................

July
Aug. Sept. Oct.
6,000 7,000 5,000 4,000
700
500
400
300
6,700 7,500 5,400 4,300
600
700
500
400
6,100 6,800 4,900 3,900

Problem 9-16 (continued)

3. The materials purchases budget for the third quarter:
Required productionpairs
(above).............................
Raw materials needs per
pair ..................................
Production needs (kgs.) ........
Add desired ending
inventory ..........................
Total needs..........................
Less beginning inventory.......
Raw materials to be
purchased .........................
Cost of raw materials to be
purchased at $2.50 per
kg. ...................................

July

Aug.

Sept.

Quarter

6,100

6,800

4,900

17,800

_ 2kgs.
12,200

_ 2kgs.
13,600

_ 2kgs.
9,800

_ 2kgs.
35,600

2,720
14,920
2,440

1,960
15,560
2,720

1,560 *
11,360
1,960

1,560
37,160
2,440

12,480

12,840

9,400

34,720

$31,200

$32,100

$23,500

$86,800

*3,900 pairs (October) _ 2 kgs. per pair= 7,800 kgs.;

7,800 kgs. _ 20% = 1,560 kgs.
The schedule of expected cash disbursements:

July

Aug.

Sept.

Quarter

Accounts payable, beginning

balance................................... $11,400
$11,400
July purchases:
$31,200 _ 60%, 40% ............... 18,720 $12,480
31,200
August purchases:
$32,100 _ 60%, 40% ...............
19,260 $12,840 32,100
September purchases:
$23,500 _ 60%........................
14,100 14,100
Total cash disbursements ............ $30,120 $31,740 $26,940 $88,800

Problem 9-19 (120 minutes)

1. Schedule of expected cash collections:

April
May
June
Total
Cash sales ............................... $14,000 $17,000 $18,000 $ 49,000
Credit sales.............................. 48,000 56,000 68,000 172,000
Total collections........................ $62,000 $73,000 $86,000 $221,000
2. a. Inventory purchases budget:
Budgeted cost of goods sold......
Add desired ending inventory* ..
Total needs..............................
Less beginning inventory...........
Required purchases ..................

April
May
June
Total
$42,000 $51,000 $54,000 $147,000
15,300 16,200
9,000
9,000
57,300 67,200 63,000 156,000
12,600 15,300 16,200
12,600
$44,700 $51,900 $46,800 $143,400

At April 30: $51,000 _ 30% = $15,300.

At June 30: $50,000 July sales _ 60% _ 30% = $9,000.

b. Schedule of cash disbursements for purchases:

April
May
June
Total
For March purchases ................ $18,300
$18,300
For April purchases................... 22,350 $22,350
44,700
For May purchases ...................
25,950 $25,950
51,900
For June purchases ..................
23,400
23,400
Total cash disbursements .......... $40,650 $48,300 $49,350 $138,300

Problem 9-19 (continued)

3. Schedule of cash disbursements for operating expenses:

April
May
June
Total
$ 7,500 $ 7,500 $ 7,500 $22,500
4,200
5,100
5,400 14,700
6,000
6,000
6,000 18,000
2,800
3,400
3,600
9,800

Salaries and wages.......................

Shipping......................................
Advertising ..................................
Other expenses............................
Total cash disbursements for
operating expenses.................... $20,500 $22,000 $22,500 $65,000
4. Cash budget:

April
May
Cash balance, beginning ............... $ 9,000 $ 8,350
Add cash collections ..................... 62,000 73,000
Total cash available.................... 71,000 81,350
Less disbursements:
For inventory purchases ............. 40,650 48,300
For operating expenses .............. 20,500 22,000
For equipment purchases ........... 11,500
3,000
For dividends ............................
0
0
Total disbursements...................... 72,650 73,300
Excess (deficiency) of cash............ (1,650) 8,050
Financing:
Borrowings ............................... 10,000
0
Repayments ..............................
0
0
Interest* ..................................
0
0
Total financing ............................. 10,000
0
Cash balance, ending.................... $ 8,350 $ 8,050
* $10,000 _ 12% _ 3/12 = $300.

June
Total
$ 8,050 $ 9,000
86,000 221,000
94,050 230,000
49,350 138,300
22,500 65,000
0 14,500
3,500
3,500
75,350 221,300
18,700
8,700
0 10,000
(10,000) (10,000)
(300)
(300)
(10,300)
(300)
$ 8,400 $ 8,400

Problem 9-19 (continued)

5. Income Statement:
NORDIC COMPANY
Income Statement
For the Quarter Ended June 30
Sales........................................................
Less cost of goods sold:
Beginning inventory (given) ..................... $ 12,600
Add purchases (Part 2) ............................ 143,400
Goods available for sale ........................... 156,000
Ending inventory (Part 2).........................
9,000
Gross margin ............................................
Less operating expenses:
Salaries and wages (Part 3) .....................
22,500
Shipping (Part 3) ....................................
14,700
Advertising (Part 3) .................................
18,000
Depreciation...........................................
6,000
Other expenses (Part 3) ..........................
9,800
Net operating income ................................
Less interest expense (Part 4).....................
Net income ...............................................

$245,000

147,000
98,000

71,000
27,000
300
$ 26,700

Problem 9-19 (continued)

6. Balance sheet:

NORDIC COMPANY
Balance Sheet
June 30

Assets

Current assets:
Cash (Part 4)................................................................. $ 8,400
Accounts receivable (80% _ $90,000) ..............................
72,000
Inventory (Part 2) ..........................................................
9,000
Total current assets ..........................................................
89,400
Buildings and equipment, net
($214,100 + $14,500 $6,000) ...................................... 222,600
Total assets ..................................................................... $312,000

Liabilities and Equity

Current liabilities:
Accounts payable (Part 2: 50% _ $46,800)......
Shareholders equity:
Capital stock................................................. $190,000
Retained earnings* .......................................
98,600
Total liabilities and equity .................................
* Retained earnings, beginning.....................
Add net income........................................
Total .......................................................
Less dividends .........................................
Retained earnings, ending .........................

$ 75,400
26,700
102,100
3,500
$ 98,600

$ 23,400
288,600
$312,000