Problem 1 (Schedule of expected Cash Collections and Disbursements)

Requirement # 1:
Prepare a schedule of expected cash collections for September
September cash sales P7,400
September collections on account:
July sales: P 200,000 x 18% 3,600
August sales: P 30,000 x 70% 21,000
September sales: P 40,000 x 10% 4,000
Total cash collections P36,000

Requirement # 2:
Prepare a schedule of expected cash disbursements during September for inventory purchases
Payments to suppliers:
August purchases (accounts payable) P16,000
September purchases P 25,000 x 20% 5,000
Total cash payments P21,000

Requirement # 3:
Prepare a cash budget for September. Indicate in the financing section any borrowing that will be needed
during September.
COOKIE PRODUCTS
CASH BUDGET
For the month of September
Cash balance, September 1 P9,000
Add cash receipts:
Collection from customers 36,000
Total cash available before current financing 45,000
Less disbursement:
Payments to suppliers for inventory P21,000
Selling and administrative expenses 9,000
Equipment purchases 18,000
Dividends paid 3,000
Total disbursements 51,000
Excess (deficiency) of cash available over disbursement (6,000)
Financing:
Borrowings 11,000
Repayments 0
Interest 0
Total financing 11,000
Cash balance, September 30 P5,000
*P13,000- 4,000 = P9,000

Problem 2 (Production and Purchases Budgets)

Requirement # 1:
Prepare a production budget for Toyclay for the months of July, August, September, and October
Production Budget:
July August September October
Budget sales (units) 40,000 50,000 70,000 35,000
Add desired ending inventory 20,000 26,000 15,500 11,000
Total needs 60,000 76,000 85,500 46,000
Less beginning inventory 17,000 20,000 26,000 15,500
Required production 43,000 56,000 59,500 30,500

Requirement # 2:
Examine the production budget that you prepared. Why will the company produce more units than it sells
in July and August and less units than it sells in September and October?
The company is stocking inventory in July and August in preparation for the peak sales season in
September. As a result, during some months, output often outnumbers sales. Inventory levels are being
reduced in September and October in expectation of lower sales in the final months of the year. As a
result, output during these months is lower than sales in order to reduce inventory levels.

Requirement # 3:
Prepare a budget showing the quantity of material P214 to be purchased for July, August, and September,
and for the quarter in total.
Raw materials purchases budget:
July August September Third Quarter
Required production (units) 43,000 56,000 59,500 158,500
Material P214 needed per unit x 3lbs x 3lbs x 3lbs x3lbs
Production needs (lbs.) 129,000 168,000 178,500 475,500
Add desired ending inv. (lbs) 84,000 89,250 45,750 45, 750
Total material P214 needs 213,000 257,250 224,250 521,250
Less beginning inv. (lbs) 64,000 84,000 89,250 64,500
Material P214 purchases (lbs) 148,500 173,250 135,000 456, 750
*30,500 units (October production) x 3lbs. per unit = 91,500 lbs. x 0.5 = 45,750 lbs.

Problem 4 (Sales, Production and Materials Purchases Budget)

Requirement # 1:
Budget of anticipated sales
Nikko Manufacturing Company
Sales Budget
For the year ending December 31, 20X3
Units Amount
First quarter 16,000 P480,000
Second quarter 20,000 600,000
Third quarter 22,000 660,000
Fourth quarter 22,000 660,000
Total 80,000 P2,400,000
Requirement # 2:
Statement of Production Required
Nikko Manufacturing Company
Statement of Production Required
For 20X3
Quarter 1st 2nd 3rd 4th Total
Units to be sold 16,000 20,000 22,000 22,000 80,000
Add: Desired ending inv (20%) 4,000 4,400 4,400 5,000 5,000
Total unts required 20,000 24,400 26,400 27,000 85,000
Less; Beginning Inventory 3,000 4,000 4,400 4,400 3,000
Units to be produced 17,000 20,400 22,000 22,600 82,000

Requirement # 3:
Statement of Raw materials purchase requirements
Nikko Manufacturing Company
Statement of Raw Materials Purchase Requirements
For 20X3
Quarter 1st 2nd 3rd 4th Total
Units required for production 51,000 61,200 66,000 67,800 246,000
Add: Desired ending inventory 12,240 13,200 13,560 15,000 15,000
Total units 63,240 74,400 79,560 82,800 261,000
Less: Beginning inventory 12,500 12,240 13,200 13, 560 12,500
Raw materials to be purchased 50,740 62,160 66,360 69,240 248,500
Problem 5 (Schedule of Expected Cash Collections; Cash Budget
Requirement # 1:
Prepare a schedule of expected cash collection for April, May, and June and for the three months in total.
Schedule of expected cash collections:
Month April May June Quarter
From accounts receivable P141,000 P7,200 P148,200
From April sales:
20% x 200,000 40,000 40,000
75% x 200,000 150,000 150,000
4% x 200,000 8,000 8,000

From May sales:

20% x 300,000 60,000 60,000
75% x 300,000 225,000 225,000

From June sales:

20% x 250,000 50,000 50,000
Total cash collections P181,000 P217,000 P283,000 P681,200

Requirement # 2:
Prepare a cash budget, by month and in total, for the three-month period.
Month April May June Quarter
Cash balance, beginning P26,000 P27,000 20,200 P26,000
Add receipts:
Collections from customers 181,000 217,200 283,000 681,200
Total available 207,000 244,200 303,200 707,200
Less disbursements:
Merchandise purchases 108,000 120,000 180,000 408,000
Payroll 9,000 9,000 8,000 26,000
Lease payments 15,000 15,000 15,000 45,000
Advertising 70,000 80,000 60,000 210,000
 Equipment purchases 8,000 ---------- --------- 8,000
Total Disbursement 210,000 224,000 263,000 697,000
Excess (deficiency) of
Receipts over disbursements (3,000) 20,200 40,200 10,200
Financing:
Borrowings 30,000 ------ ------- 30,000
Repayments ------ ------- (30,000) (30,000)
Interest ------ ------- (1,200) (1,200)
Total financing 30,000 -------- (31,200) (1,200)
Cash balance, ending P27,000 20,200 P9,000 P9,000

Requirement # 3:
If the company needs a minimum cash balance of P20,000 to star each month, can the loan be repaid as
planned? Explain.
The loan would not be returned in full by June 30 if the firm requires a minimum cash balance of P20,000
to begin each month. As indicated above, if the loan is paid off in full by June 30, the cash amount will be
only P9,000. At least some of the loan obligation will have to be carried over to July. When there is
enough cash flow to cover the repayment.