PROBLEMS Chap 5

PROBLEMS
PROBLEM 1 [SCHEDULE OF EXPECTED CASH COLLECTIONS AND

DISBURSEMENTS]
1. Prepare a schedule of expected cash collections for September
2. Prepare a schedule of expected cash disbursements during September for
inventory purchases
3. Prepare a cash budget for September. Indicate in the financing section any
borrowing that will be needed during September
ANSWERS:
1)
September cash sales 7,400

September collections on account:
July sales: 20,000 x 18% 3,600
August sales: 30,000 x 70% 21,000
September sales: 40,000 x 10% 4,000
Total cash collections 21,000
2)
Payment to suppliers:
August purchases (A/P) 16,000
September purchases (25,000 x 20%) 5,000
Total cash payments 21,000
3)
Cookie products
Cash budget
For the month of September
Cash balance, September 9,000
Add: cash receipts
Collections from customers 36,000
Total cash available before current financing 45,000
Less: disbursement:
Payments to suppliers for inventory 21,000
Selling and administrative expenses 9,000
Equipment purchases 18,000
Dividend paid 3,000
Total disbursements 51,000
Excess (deficiency) of cash available over
disbursement
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Financing
Borrowings 11,000
Repayments 0
Interest 0
Total financing 11,000
Cash balance, September 30 5,000
PROBLEM 2 [PRODUCTION AND PURCHASES AND BUDGETS]

1. Prepare a production budget for Toyclay for the months July, August,
September and October.
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?
3. Prepare a budget showing the quantity of material P214 to be purchased
for July, August and September and for the quarter in total.
ANSWER:
1)
July August September October

Budget Sales 40,000 50,000 70,000 35,000
(units)
Desired 20,000 26,000 15,500 11,000
Inventory
Total Needs 60,000 76,000 85,500 46,000
LESS: 17,000 20,000 26,000 15,500
Beginning
Inventory
Required 43,000 56,000 59,500 30,500
Production
2)
3)
July August September 3rd Quarter

Required 43,000 56,000 59,500 158,500
Production
(units)
Material 31bs 31bs 31bs 31bs
P214 per
unit
production
need
Production 129,000 168,000 178,500 475,500
need
ADD: 84,000 89,250 45,750 45,750
Desired
Inventory
Total 213,000 257,250 224,250 521,250
Material
P214 needs
LESS: 64,500 84,000 89,250 64,500
Beginning
Inventory
Materials P214 148,500 173,250 135,000 456,750
Purchase
PROBLEM 3 [CASH BUDGET; INCOME STATEMENTS; STATEMENT OF

FINANCIAL POSITION]
1. Prepare a cash budget for June. Support your budget with schedules
showing budgeted cash receipts from sales and budgeted cash payments
for inventory purchases
2. Prepare a budgeted income statement for June.
3. Prepare a budgeted statement of financial position as June 30.
ANWERS:
1)
Schedule of Cash Receipts:

Cash Sales-June P60,000
Collections on Accounts
Receivable: 72,000
May 31 Balance 95,000
June (50% x 190,000)
Total Cash Receipts P227,000
Schedule for Cash Payments for

Purchases: P90,000
May 31 Accounts Payable 80,000
Balance
June Purchase (40% x
200,000)
Total Cash Payments P170,00
2)
Picture This, Inc.
Cash Budget
For the Month of June
Cash Balance, Beginning P8,000
ADD: Receipts from Customers 227,000
Total Cash Available 235,000
LESS: Disbursements;
Purchase of Inventory 170,000
Operating Expenses 51,000
Purchases of Equipment 9,000
Total Cash Disbursement 230,000
Excess of Receipts over Disbursements 5,000
Financing:
Borrowing-note 18,000
Repayments (15,000)
Interest (5,000)
Total Financing 2,500
Cash Balance, Ending 7,500
PROBLEM 4 [SALES, PRODUCTION AND MATERIALS PURCHASES BUDGET]

1. Budget of anticipated sales
2. Statement of production required
3. Statement of raw materials purchase requirements
ANSWERS:
1)
Nikko Manufacturing Company
Sales Budget
For the Year Ending December 21, 2005
Units Amounts
First Quarter 16,000 480,000
Second Quarter 20,000 600,000
Third Quarter 22,000 660,000
Fourth Quarter 22,000 660,000
Total 80,000 2,400,000
2)
Statement of Production Required
For 20x3
1ST 2ND 3RD 4TH TOTAL

Units to 16,000 20,000 22,000 22,000 80,000
be Sold
ADD:
Desired
Ending
Inventor
y (20%) 4,000 4,800 4,800 5,000 5,000
Total 20,000 24,400 26,400 27,000 85,000
units
required
LESS:
Beginnin
g 3,000 8,000 4,400 4,400 3,000
Inventor
y
Units to 17,000 20,400 22,000 22,600 82,000
be
Produced
3)
Statement of Raw Materials Purchased Requirements
For 20x3
QUARTER
1st 2nd 3rd 4th Total
Units 51,000 61,200 66,000 67,800 246,000
required
for
productio
n
ADD:
Desired
Ending 12,240 13,200 13,560 15,000 15,000
Inventory
Total units 63,240 74,400 79,500 82,800 261,000
LESS:
Beginning
Inventory 12,500 12,240 13,200 13,560 12,500
Raw 50,740 62,160 66,360 69,240 248,500
materials to
be
Purchased
PROBLEM 5 [SCHEDULE OF EXPECTED CASH COLLECTIONS; CASH

BUDGET]
1. Prepare a schedule of expected cash collections for April, May and June
and for the three months in total.
2. Prepare a cash budget, by month and in total, for the three-month period.
3. If the company needs a minimum cash balance of P20,000 to start each
month, can the loan be repaid as planned? Explain.
ANSWER:
1)
MONTH
APRIL MAY JUNE QUARTER
From P141,000 P7,200 P148,200
Account
Receivable
From April
sales: 40,000 40,000
20%x100,00 150,000 150,000
0 8,000 8,000
75%x200,00
0
4%x200,000
From May
sales: 60,000 60,000
20%x300,00 225,000 225,000
0
75%x300,00
0
From June
sales: 50,000 50,000
20%x250,00
0
Total cash P181,000 P217,000 P283,000 P681,000
collections
2)
CASH BUDGET
MONTH
APRIL MAY JUNE QUARTER
Cash P26,000 27,000 P20,200 P26,000
Balance,
Beginning
Add:
Receipts; 181,000 217,200 283,000 681,200
Collections
from
customers
Total available 207,000 244,200 303,200 707,200
Less
Disbursemen
ts: 108,000 120,000 180,000 408,000
Merchandise
purchases 9,000 9,000 8,000 26,000
Payroll 15,000 15,000 15,000 45,000
Lease 70,000 80,000 60,000 210,000
Payment 8,000 - - 8,000
Advertising
Equip.
purchases
Total 210,000 224,000 263,000 697,000
Disbursements
Excess
(Deficiency (3,000) 22,200 40,200 10,200
of Receipts
over
Disbursemen
ts)
Financing:
30,000 - - 30,000
Borrowing - - (80,000) (50,000)
- - (1,200) (1,200)
Repayments
Interest
Cash Balance, P27,000 P20,200 P9,000 P19,000
Ending
PROBLEM 6 [FLEXIBLE BUDGET]

Prepare in summary from a flexible budget for each department showing costs at
normal capacity, at 90, 80, 70 and 60 percent of normal capacity.
ANSWER:
Summer Machine Company
Flexible Overhead Budget
Department 1
100% 90% 80% 70% 60%
Machine 200,000 180,000 160,000 140,000 120,000
hours
Variable P1,300,000 P1,170,000 P1,040,000 P910,000 P780,000
overhead
Fixed 300,000 300,000 300,000 300,000 300,000
overhead
Total P1,600,00 P1,470,00 P1,340,00 P1,210,00 P1,080,00
0 0 0 0 0
Summer Machine Company

Flexible Overhead Budget
Department 2
100% 90% 80% 70% 60%

Direct 200,000 180,000 160,000 140,000 120,000
labor
hours
Machine 400,000 380,000 320,000 280,000 240,000
hours
Variable P1,400,000 P1,260,000 P1,120,000 P980,000 P840,000
overhead
Fixed 500,000 500,000 500,000 500,000 500,000
overhead
Total P1,900,00 P1,760,00 P1,620,00 P1,480,00 P1,340,00
0 0 0 0 0
PROBLEM 7 [CASH BUDGET WITH SUPPORTING SCHEDULES]

1. Prepare a schedule of expected cash collections for July, August and
September and for the quarter in total.
2. Prepare the following for merchandise inventory:
a. A merchandise purchase budget for July, August and September
b. A schedule of expected cash disbursements for merchandise purchases
for July, August and September and for the quarter in total.
3. Prepare a cash budget for July, August and September and for the quarter
in total.
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PROBLEMS

PROBLEM 1 [SCHEDULE OF EXPECTED CASH COLLECTIONS AND

September cash sales 7,400

PROBLEM 2 [PRODUCTION AND PURCHASES AND BUDGETS]

July August September October

July August September 3rd Quarter

PROBLEM 3 [CASH BUDGET; INCOME STATEMENTS; STATEMENT OF

Schedule of Cash Receipts:

Schedule for Cash Payments for

PROBLEM 4 [SALES, PRODUCTION AND MATERIALS PURCHASES BUDGET]

1ST 2ND 3RD 4TH TOTAL

PROBLEM 5 [SCHEDULE OF EXPECTED CASH COLLECTIONS; CASH

PROBLEM 6 [FLEXIBLE BUDGET]

Summer Machine Company

100% 90% 80% 70% 60%

PROBLEM 7 [CASH BUDGET WITH SUPPORTING SCHEDULES]

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