FINANCIAL MANAGEMENT

PRACTICE PROBLEM – FINANCIAL PLANNING

MICO’S TEAM

The Polytone, Inc. is a retailer whose sales are all made on credit. Sales are billed twice monthly, on
the 10th of the month for the last half of the prior month's sales and on the 20th of the month for the
first half of the current month's sales. The terms of all sales are 2/10, net 30. Based on past experience,
the collection experience of accounts receivable is as follows:

Within the discount period 80%

On the 30th day 18%

Uncollectible 2%

The sales value of shipments for May and the forecast for the next four months are:

May (actual) P700,000

June 800,000

July 900,000

August 900,000

September 600,000

The company's average markup on its products is 20% of the sales price. It also purchases
merchandise for resale to meet the current month's sales demand and to maintain a desired monthly
ending inventory of 25% of the next month's sales. All purchases are on credit with terms of net 50. The
company pays for one-half of a month's purchases in the month of purchase and the other half in the
month following the purchase. All sales and purchases occur uniformly throughout the month.

1. How much cash can the company collect from accounts receivable during July?

a. P801,400
b. P815,000
c. P842,600
d. P794,000

2. How much cash will be collected in September from sales made in August?

a. P441,000
b. P433,800
 c. P400,400
d. P337,000

3.The budgeted peso value of inventory on August 31 will be

a. P150,000
b. P180,000
c. P130,000
d. P120,000

4. How much merchandise should the company plan to purchase during June?

a. P650,000
b. P620,000
c. P680,000
d. P660,000

5.The amount of payments for the month of August is:

a. P720,000
b. P780,000
c. P690,000
d. P660,000

ANGEL’S TEAM

The following information pertains to Chelsy Company:

Month Sales Purchases

January 30,000 10,000

February 10,000 5,000

March 20,000 12,000

Thirty percent of purchases are paid in cash in the month of purchase, and the balance is paid
the following month. Cash is collected from customers in the following manner.

Month of sale 40%

Month following sale 60%

The company will incur labor costs equal to 15% of sales, and other operating costs of P15,000
per month (including P4,000 of depreciation). Both of these are paid in the month incurred. The cash
balance on March 1 is P3,500. A minimum of cash balance of P2,500 is required at the end of the month.
Money can be borrowed in multiples of P500.

6.How much cash will be paid to suppliers in March?

 a. P12,000
b. P7,100
c. P9,900
d. P13,000

7. How much cash will be disbursed for operations in March?

a. P7,100
b. P10,100
c. P21,100
d. P25,100

8. How much cash will be collected from customers in March?

a. P20,000
b. P16,000
c. P7,800
d. P14,000

9. What is the ending cash balance for March?

a. P2,900
b. P2,500
c. P(3,500)
d. P3,500

AL’S TEAM

10. A company has the following expected pattern of collections on credit sales: 70 percent collected in
the month of sale, 15 percent in the month after the month of sale, and 14 percent in the second month
after the month of sale. The remaining 1 percent is never collected. At the end of May, it has the
following accounts receivable balances:

From April sales P21,000

From May sales 48,000

The expected sales for June are P150,000. What are the total sales for April?

a. P150,000
b. P72,414
c. P70,000
d. P140,000

11. Budgeted sales for the first six months of 2020 of a company are listed below:

JANUARY FEBRUARY MARCH APRIL MAY JUNE

UNITS: 6,000 7,000 8,000 7,000 5,000 4,000
It has a policy of maintaining an inventory of finished goods equal to 40 percent of the next month's
budgeted sales. If the company plans to produce 6,000 units in June, what are the budgeted sales for
July?

a. 3,600 units
b. 1,000 units
c. 9,000 units
d. 8,000 units

HONEY’S TEAM

12. The company has the following expected pattern of collections on credit sales: 70 percent collected
in the month of sale, 15 percent in the month after the month of sale, and 14 percent in the second
month after the month of sale. The remaining 1 percent is never collected. At the end of May, the
company has the following accounts receivable balances:

From April sales P21,000

From May sales P48,000

The company's expected sales for June are P150,000. How much cash will the company expect to collect
in June?

a. P127,400
b. P129,000
c. P148,600
d. P152,520

13. For the month of October, a company predicts total cash collections to be P1 million. Also for
October, it estimates that its beginning cash balance will be P50,000 and that it will borrow cash in the
amount of P70,000. If the company estimates an ending cash balance of P30,000 for October, what must
its projected cash disbursements be?

a. P1,090,000
b. P1,120,000
c. P1,070,000
d. P1,020,000