Fundamental Accounting Principles
Fundamental Accounting Principles
24th Edition
ISBN: 9781259916960
Author: Wild, John J., Shaw, Ken W.
Publisher: Mcgraw-hill Education,
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Chapter 22, Problem 7BPSB
To determine

Concept Introduction:

Cash Budget-

Cash budget is a budget which helps to estimate the cash inflows and cash outflows of the business during a specific period of time. It includes all the revenues, expenses paid as well as any loan taken and its payment. It includes all those transactions which are made in cash. It helps to assess whether company has sufficient cash available to operate.

Requirement 1-

To prepare:

Schedule of expected cash collections of credit sales.

Expert Solution
Check Mark

Answer to Problem 7BPSB

    Connick Company
    Schedule of expected cash collections
    ParticularsJanuaryFebruaryMarchApril
    Budgeted/ Actual sales396,000495,000418,000412,500
    Collections from accounts receivable-
    Collection of January months' sales91,080
    Collection of months' sales173,250113,850
    Collection of March months' sales167,200146,300
    Collection of April months' sales165,000
    Total collections of credit sales431,530425,150

Explanation of Solution

March-

  Collection of January months' sales = January months' sales * 23%Collection of January months' sales = $396,000 * 23%Collection of January months' sales = $91,080

  Collection of February months' sales = February months' sales * 35%Collection of February months' sales = $495,000 * 35%Collection of February months' sales = $173,250

  Collection of March months' sales = March months' sales * 40%Collection of March months' sales = $418,000 * 40%Collection of March months' sales = $167,200

Total collection of credit sales of March month is calculated as under-

   Total collection of credit sales of March = Collection of January months' sales  + Collection of February months' sales + Collection of March months' salesTotal collection of credit sales of March = $91,080 + $173,250 + $167,200Total collection of credit sales of March = $431,530

April-

  Collection of February months' sales = February months' sales * 23%Collection of February months' sales = $495,000 * 23%Collection of February months' sales = $113,850

  Collection of March months' sales = March months' sales * 35%Collection of March months' sales = $418,000 * 35%Collection of March months' sales = $146,300

   Collection of April months' sales = April months' sales * 40% Collection of April months' sales = $412,500 * 40%Collection of April months' sales = $165,000

Total collection of credit sales of April month is calculated as under-

   Total collection of credit sales of April = Collection of February months' sales  + Collection of March months' sales + Collection of April months' salesTotal collection of credit sales of April = $113,850+$146,300+$165,000Total collection of credit sales of April = $425,150

Conclusion:

Thus, schedule of expected cash collections of credit sales is prepared.

To determine

Concept Introduction:

Cash Budget-

Cash budget is a budget which helps to estimate the cash inflows and cash outflows of the business during a specific period of time. It includes all the revenues, expenses paid as well as any loan taken and its payment. It includes all those transactions which are made in cash. It helps to assess whether company has sufficient cash available to operate.

Requirement 2-

To prepare:

Schedule of budgeted ending inventories.

Expert Solution
Check Mark

Answer to Problem 7BPSB

    Connick Company
    Schedule of budgeted ending inventory
    ParticularsJanuaryFebruaryMarchApril
    Next period's budgeted sales (units)22,50019,00018,75021,000
    Ratio of inventory of future sales20%20%20%20%
    Expected budgeted sales (units)4,5003,8003,7504,200
    Add: Safety stock (units)100100100100
    Budgeted ending inventory (units)4,6003,9003,8504,300

Explanation of Solution

Given,

  • January sales = 18,000 units
  • February sales = 22,500 units
  • March sales = 19,000 units
  • April sales = 18,750 units
  • May sales = 21,000 units

  Budgeted ending inventory=(Next periods budgeted sales*Ratio of inventory of future sales)+ Safety stock

January-

  Budgeted ending inventory = ( February sales * Ratio of inventory of future sales) + Safety stockBudgeted ending inventory = ( 22,500*20%) +100Budgeted ending inventory = 4,500+100Budgeted ending inventory = 4,600

February

  Budgeted ending inventory = ( March sales * Ratio of inventory of future sales) + Safety stockBudgeted ending inventory = ( 19,000*20%) +100Budgeted ending inventory = 3,800+100Budgeted ending inventory = 3,900

March

  Budgeted ending inventory = ( April sales * Ratio of inventory of future sales) + Safety stockBudgeted ending inventory = ( 18,750*20%) +100Budgeted ending inventory = 3,750+100Budgeted ending inventory = 3,850

April

  Budgeted ending inventory = ( May sales * Ratio of inventory of future sales) + Safety stockBudgeted ending inventory = ( 21,000*20%) +100Budgeted ending inventory = 4,200+100Budgeted ending inventory = 4,300

Conclusion:

Thus, schedule of budgeted ending inventory is prepared.

To determine

Concept Introduction:

Cash Budget-

Cash budget is a budget which helps to estimate the cash inflows and cash outflows of the business during a specific period of time. It includes all the revenues, expenses paid as well as any loan taken and its payment. It includes all those transactions which are made in cash. It helps to assess whether company has sufficient cash available to operate.

Requirement 3-

To prepare:

Merchandise purchase budget.

Expert Solution
Check Mark

Answer to Problem 7BPSB

    Connick Company
    Merchandise purchase budget
    ParticularsJanuaryFebruaryMarchApril
    Budgeted ending inventory4,6003,9003,8504,300
    Add: Budgeted sales for the period 22,50019,00018,750
    Required inventory 26,40022,85023,050
    Deduct: Beginning inventory (4,600)(3,900)(3,850)
    Units to be purchased 21,80018,95019,200
    Rate per unit $12$12$12
    Dollar amount of budgeted purchases $261,600$227,400$230,400

Explanation of Solution

Given,

Budgeted ending inventory- (Calculated in requirement 2)

  • January = 4,600 units
  • February = 3,900 units
  • March = 3,850 units
  • April = 4,300 units

Budgeted sales for the period

  • February = 22,500 units
  • March = 19,000 units
  • April = 18,750 units
  • Units to be purchased is calculated as follows-

      Units to be purchased =Budgeted ending inventory+ Budgeted sales for the period Beginning inventory

    February

      Units to be purchased = 3,900+22,5004,600Units to be purchased = 21,800 units

    March

      Units to be purchased = 3,850+19,0003,900Units to be purchased =18,950 units

    April

      Units to be purchased =4,300+18,7503,850Units to be purchased =19,200 units

    Dollar amount of budgeted purchases is calculated as follows-

      Dollar amount of budgeted purchases = Units to be purchased * Rate per unit

    February

      Dollar amount of budgeted purchases = 21,800 * $12Dollar amount of budgeted purchases = $261,600

    March

      Dollar amount of budgeted purchases = 18,950 * $12Dollar amount of budgeted purchases = $227,400

    April

      Dollar amount of budgeted purchases = 19,200 * $12Dollar amount of budgeted purchases = $230,400

    Conclusion:

    Thus, merchandise purchase budget is prepared.

    To determine

    Concept Introduction:

    Cash Budget-

    Cash budget is a budget which helps to estimate the cash inflows and cash outflows of the business during a specific period of time. It includes all the revenues, expenses paid as well as any loan taken and its payment. It includes all those transactions which are made in cash. It helps to assess whether company has sufficient cash available to operate.

    Requirement 4-

    To prepare:

    Schedule of cash payments for purchases.

    Expert Solution
    Check Mark

    Answer to Problem 7BPSB

      Connick Company
      Schedule of expected cash payments for purchases
      ParticularsFebruaryMarchApril
      Budgeted purchases261,600227,400230,400
      Cash disbursements for purchases-
      Payment of February month's purchases 183,120
      Payment of March month's purchases 68,220159,180
      Payment of April month's purchases 69,120
      Total cash disbursements of purchases 251,340228,300

    Explanation of Solution

    Budgeted purchases- (calculated in requirement 3)

    • February= 261,600
    • March = 227,400
    • April = 230,400

    March-

      Payment of February month's purchases = February month's purchases * 70%Payment of February month's purchases = $261,600 * 70%Payment of February month's purchases = $183,120Payment of March month's purchases = March month's purchases * 30%Payment of March month's purchases = $227,400 * 30%Payment of March month's purchases = $68,220

    Total cash disbursements of purchases is calculated as follows-

      Total cash disbursements of purchases =Payment of February month's purchases + Payment of March month's purchasesTotal cash disbursements of purchases = $183,120+$68,220Total cash disbursements of purchases =$251,340

    April-

      Payment of March month's purchases = March month's purchases * 70%Payment of March month's purchases = $227400 * 70%Payment of March month's purchases = $159,180Payment of April month's purchases = April month's purchases * 30%Payment of April month's purchases = $230,400 * 30%Payment of April month's purchases = $69,120

    Total cash disbursements of purchases is calculated as follows-

      Total cash disbursements of purchases =Payment of March month's purchases + Payment of April month's purchasesTotal cash disbursements of purchases = $159,180+$69,120Total cash disbursements of purchases =$228,300

    Conclusion:

    Thus, schedule of expected cash disbursements of purchases is prepared.

    To determine

    Concept Introduction:

    Cash Budget-

    Cash budget is a budget which helps to estimate the cash inflows and cash outflows of the business during a specific period of time. It includes all the revenues, expenses paid as well as any loan taken and its payment. It includes all those transactions which are made in cash. It helps to assess whether company has sufficient cash available to operate.

    Requirement 5-

    To prepare:

    Cash Budget

    Expert Solution
    Check Mark

    Answer to Problem 7BPSB

      Connick Company
      Cash Budget
      ParticularsMarch April
      Beginning cash balance50,00058,070
      Add: Budgeted cash receipts431,530425,150
      Total cash available481,530483,220
      Cash Disbursements-
      Cash payments for purchases251,340228,300
      Selling and administrative expenses160,000160,000
      Total cash disbursements411,340388,300
      Total cash available over disbursements70,19094,920
      Loan Activity-
      Loan form bank00
      Interest payment @12% per annum1200
      Repayment of loan to bank12,0000
      Ending cash balance58,07094,920
      Ending loan balance00

    Explanation of Solution

    Given,

    Beginning cash balance = $50,000

    Budgeted cash receipts- (Calculated in requirement 1)

    • March - $431,530
    • April - $425,150

    Cash payments for purchases- (Calculated in requirement 4)

    • March - $251,340
    • April - $228,300

      Selling and administrative expenses = Total Selling and administrative expenses / 12 monthsSelling and administrative expenses = $1,920.000 / 12 monthsSelling and administrative expenses= $160,000

      Total cash disbursements = Cash payments for purchases+Selling and administrative expenses

    March-

      Total cash disbursements =$251,340+$160,000Total cash disbursements =$411,340

    April-

      Total cash disbursements =$228,300+$160,000Total cash disbursements =$388,300

    Total cash available over disbursements is calculated as follows-

      Total cash available over disbursements= Budgeted cash receiptsTotal cash disbursements

    March-

      Total cash available over disbursements=$481,530$411,340Total cash available over disbursements=$70,190

    April-

      Total cash available over disbursements=$483,220$388,300Total cash available over disbursements=$94,920

    Interest payment-

    March

    Opening balance of Loan = $12,000

      Interest = $12,000*1%Interest = $120

    Conclusion:

    Thus, cash budget is prepared.

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    Chapter 22 Solutions

    Fundamental Accounting Principles

    Ch. 22 - Prob. 11DQCh. 22 - Prob. 12DQCh. 22 - Prob. 13DQCh. 22 - Prob. 14DQCh. 22 - Prob. 15DQCh. 22 - Prob. 16DQCh. 22 - Budget motivation C1 For each of the following...Ch. 22 - Prob. 2QSCh. 22 - Prob. 3QSCh. 22 - Prob. 4QSCh. 22 - Prob. 5QSCh. 22 - Prob. 6QSCh. 22 - Prob. 7QSCh. 22 - Prob. 8QSCh. 22 - Prob. 9QSCh. 22 - Prob. 10QSCh. 22 - Prob. 11QSCh. 22 - Prob. 12QSCh. 22 - Prob. 13QSCh. 22 - Prob. 14QSCh. 22 - Prob. 15QSCh. 22 - Prob. 16QSCh. 22 - Prob. 17QSCh. 22 - Prob. 18QSCh. 22 - Prob. 19QSCh. 22 - QS 22-20 Cash receipts, with uncollectible...Ch. 22 - Cash receipts, with uncollectible accounts P2...Ch. 22 - Prob. 22QSCh. 22 - Prob. 23QSCh. 22 - Prob. 24QSCh. 22 - Prob. 25QSCh. 22 - Prob. 26QSCh. 22 - Prob. 27QSCh. 22 - Prob. 28QSCh. 22 - Prob. 29QSCh. 22 - Prob. 30QSCh. 22 - Prob. 31QSCh. 22 - Prob. 1ECh. 22 - Prob. 2ECh. 22 - Prob. 3ECh. 22 - Prob. 4ECh. 22 - Prob. 5ECh. 22 - Prob. 6ECh. 22 - Prob. 7ECh. 22 - Prob. 8ECh. 22 - Prob. 9ECh. 22 - Prob. 10ECh. 22 - Prob. 11ECh. 22 - Prob. 12ECh. 22 - Prob. 13ECh. 22 - Prob. 14ECh. 22 - Prob. 15ECh. 22 - Prob. 16ECh. 22 - Prob. 17ECh. 22 - Exercise 22-18 Budgeted cash receipts P2 Jasper...Ch. 22 - Prob. 19ECh. 22 - Prob. 20ECh. 22 - Prob. 21ECh. 22 - Prob. 22ECh. 22 - Exercise 22-23 Manufacturing: Cash...Ch. 22 - Prob. 24ECh. 22 - Prob. 25ECh. 22 - Prob. 26ECh. 22 - Prob. 27ECh. 22 - Prob. 28ECh. 22 - Prob. 29ECh. 22 - Prob. 30ECh. 22 - Prob. 31ECh. 22 - Exercise 22-32A Merchandising: Cash...Ch. 22 - Exercise 22-33A Merchandising: Budgeted balance...Ch. 22 - Prob. 34ECh. 22 - Prob. 35ECh. 22 - Prob. 1APSACh. 22 - Prob. 2APSACh. 22 - Prob. 3APSACh. 22 - Problem 22-4A Manufacturing: Preparation of a...Ch. 22 - Prob. 5APSACh. 22 - Problem 22-6AA Merchandising: Preparation of...Ch. 22 - Prob. 7APSACh. 22 - Prob. 8APSACh. 22 - Prob. 1BPSBCh. 22 - Prob. 2BPSBCh. 22 - Prob. 3BPSBCh. 22 - Problem 22-4B Manufacturing: Preparation of a...Ch. 22 - Prob. 5BPSBCh. 22 - Prob. 6BPSBCh. 22 - Prob. 7BPSBCh. 22 - Prob. 8BPSBCh. 22 - Prob. 22SPCh. 22 - Prob. 1AACh. 22 - Prob. 2AACh. 22 - Prob. 3AACh. 22 - Both the budget process and budgets themselves can...Ch. 22 - BTN 22-4 The sales budget is usually the first and...Ch. 22 - Certified Management Accountants must understand...Ch. 22 - Prob. 4BTNCh. 22 - Prob. 5BTNCh. 22 - To help understand the factors impacting a sales...
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