Garden Depot is a retailer that provided the following budgeted cash flows for next year: 3rd Quarter $ 330,000 $ 304,000 Total cash receipts Total cash disbursements 1st Quarter 2nd Quarter $ 280,000 $ 400,000 $ 314,000 $ 344,000 4th Quarter $350,000 $ 324,000 The company's beginning cash balance for next year will be $45,000. The company requires a minimum cash balance of $10,000 and may borrow money at the beginning of any quarter and may repay any part of its loans at the end of any quarter. Interest payments, based on a quarterly interest rate of 3%, are due on any principal at the time it is repaid. For simplicity, assume interest is not compounded. Required: Prepare the company's cash budget for next year. Note: Repayments, interest, and cash deficiencies should be indicated by a minus sign.

Garden Depot is a retailer that provided the following budgeted cash flows for next year: 3rd Quarter $ 330,000 $ 304,000 Total cash receipts Total cash disbursements 1st Quarter 2nd Quarter $ 280,000 $ 400,000 $ 314,000 $ 344,000 4th Quarter $350,000 $ 324,000 The company's beginning cash balance for next year will be $45,000. The company requires a minimum cash balance of $10,000 and may borrow money at the beginning of any quarter and may repay any part of its loans at the end of any quarter. Interest payments, based on a quarterly interest rate of 3%, are due on any principal at the time it is repaid. For simplicity, assume interest is not compounded. Required: Prepare the company's cash budget for next year. Note: Repayments, interest, and cash deficiencies should be indicated by a minus sign.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 4P

See similar textbooks

Similar questions

A companys sales for the coming months are as follows: About 20 percent of sales are cash sales, and the remainder are credit sales. The company finds that typically 10 percent of a months credit sales are paid in the month of sale, 70 percent are paid the next month, and 15 percent are paid in the second month after sale. Expected cash receipts in July are budgeted at what amount? a. 114,520 b. 143,150 c. 145,720 d. 156,000
Coral Seas Jewelry Company makes and sells costume jewelry. For the coming year, Coral Seas expects sales of 15.9 million and cost of goods sold of 8.75 million. Advertising is a key part of Coral Seas business strategy, and total marketing expense for the year is budgeted at 2.8 million. Total administrative expenses are expected to be 675,000. Coral Seas has no interest expense. Income taxes are paid at the rate of 40 percent of operating income. Required: 1. Construct a budgeted income statement for Coral Seas Jewelry Company for the coming year. 2. What if Coral Seas had interest payments of 500,000 during the year? What effect would that have on operating income? On income before taxes? On net income?
Relevant data from the Poster Companys operating budgets are: Additional data: Capital assets were sold in January for $10,000 and $4,500 in May. Dividends of $4,500 were paid in February. The beginning cash balance was $60,359 and a required minimum cash balance is $59,000. Use this information to prepare a cash budget for the first two quarters of the year
What is the amount of budgeted cash payments if purchases are budgeted for $420,000 and the beginning and ending balances of accounts payable are $95,000 and $92,000, respectively?
Cash budget The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: The company expects to sell about 10% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month following the sale and the remainder the following month (second month following sale). Depreciation, insurance, and property tax expense represent 50,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in January, and the annual property taxes are paid in December. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month. Current assets as of September 1 include cash of 40,000, marketable securities of 75,000, and accounts receivable of 300,000 (60,000 from July sales and 240,000 from August sales). Sales on account for July and August were 200,000 and 240,000, respectively. Current liabilities as of September 1 include 40,000 of accounts payable incurred in August for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of 55,000 will be made in October. Bridgeports regular quarterly dividend of 25,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of 50,000. Instructions Prepare a monthly cash budget and supporting schedules for September, October, and November. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?
What is the amount of budgeted cash payments if purchases are budgeted for $190,500 and the beginning and ending balances of accounts payable are $21,000 and $25,000, respectively?
CASH BUDGETING Helen Bowers, owner of Helens Fashion Designs, is planning to request a line of credit from her bank. She has estimated the following sales forecasts for the firm for parts of 2019 and 2020: Estimates regarding payments obtained from the credit department are as follows: collected within the month of sale, 10%; collected the month following the sale, 75%; collected the second month following the sale, 15%. Payments for labor and raw materials are made the month after these services were provided. Here are the estimated costs of labor plus raw materials: General and administrative salaries are approximately 27,000 a month. Lease payments under long-term leases are 9,000 a month. Depreciation charges are 36,000 a month. Miscellaneous expenses are 2,700 a month. Income tax payments of 63,000 are due in September and December. A progress payment of 180,000 on a new design studio must be paid in October. Cash on hand on July 1 will be 132,000, and a minimum cash balance of 90,000 should be maintained throughout the cash budget period. a. Prepare a monthly cash budget for the last 6 months of 2019. b. Prepare monthly estimates of the required financing or excess fundsthat is, the amount of money Bowers will need to borrow or will have available to invest. c. Now suppose receipts from sales come in uniformly during the month (that is, cash receipts come in at the rate of 1/30 each day), but all outflows must be paid on the 5th. Will this affect the cash budget? That is, will the cash budget you prepared be valid under these assumptions? If not, what could be done to make a valid estimate of the peak financing requirements? No calculations are required, although if you prefer, you can use calculations to illustrate the effects. d. Bowers sales are seasonal, and her company produces on a seasonal basis, just ahead of sales. Without making any calculations, discuss how the companys current and debt ratios would vary during the year if all financial requirements were met with short-term bank loans. Could changes in these ratios affect the firms ability to obtain bank credit? Explain.
Relevant data from the operating budget of The Framers are: Other data: Capital assets were sold in quarter 1 and $8,000 was collected in quarter 1 and $500 collected in quarter 2. Dividends of $500 will be paid in May The beginning cash balance was $50,000 and a required minimum cash balance is $10,000. Prepare a cash budget for the first two quarters of the year.
Shalimar Company manufactures and sells industrial products. For next year, Shalimar has budgeted the follow sales: In Shalimars experience, 10 percent of sales are paid in cash. Of the sales on account, 65 percent are collected in the quarter of sale, 25 percent are collected in the quarter following the sale, and 7 percent are collected in the second quarter after the sale. The remaining 3 percent are never collected. Total sales for the third quarter of the current year are 4,900,000 and for the fourth quarter of the current year are 6,850,000. Required: 1. Calculate cash sales and credit sales expected in the last two quarters of the current year, and in each quarter of next year. 2. Construct a cash receipts budget for Shalimar Company for each quarter of the next year, showing the cash sales and the cash collections from credit sales. 3. What if the recession led Shalimars top management to assume that in the next year 10 percent of credit sales would never be collected? The expected payment percentages in the quarter of sale and the quarter after sale are assumed to be the same. How would that affect cash received in each quarter? Construct a revised cash budget using the new assumption.
Cash budget The controller of Mercury Shoes Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: The company expects to sell about 10% of its merchandise for cash. Of sales on account, 60% are expected to be collected in the month following the sale and the remainder the following month (second month after sale). Depreciation, insurance, and property tax expense represent 12,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in February, and the annual property taxes are paid in November. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month. Current assets as of June 1 include cash of 42,000, marketable securities of 25,000, and accounts receivable of 198,000 (150,000 from May sales and 48,000 from April sales). Sales on account in April and May were 120,000 and 150,000, respectively. Current liabilities as of June 1 include 13,000 of accounts payable incurred in May for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of 24,000 will be made in July. Mercury Shoes regular quarterly dividend of 15,000 is expected to be declared in July and paid in August. Management desires to maintain a minimum cash balance of 40,000. Instructions Prepare a monthly cash budget and supporting schedules for June, July, and August. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?
Pilsner Inc. purchases raw materials on account for use in production. The direct materials purchases budget shows the following expected purchases on account: Pilsner typically pays 25% on account in the month of billing and 75% the next month. Required: 1. How much cash is required for payments on account in May? 2. How much cash is expected for payments on account in June?
Before the year began, the following static budget was developed for the estimated sales of 50,000. Sales are higher than expected and management needs to revise its budget. Prepare a flexible budget for 100,000 and 110,000 units of sales.