MANAGERIAL ACCOUNTING FUND. W/CONNECT
5th Edition
ISBN: 9781259688713
Author: Wild
Publisher: MCG
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Chapter 7, Problem 7PSA
To determine
(1)
Concept introduction:
Money (cash)
To prepare:
Table showing cash collected through credit sales (balance due) in June and July.
Expert Solution
Answer to Problem 7PSA
| Particulars | April $ | May $ | June $ | July $ | August $ |
| Collection made | 144000 | 432000 | 597600 | 820800 | 889200 |
Explanation of Solution
Table of collection through Money(cash)
| Particulars | April $ | May $ | June $ | July $ | August $ |
| Sales | 720000 | 360000 | 1080000 | 900000 | 684000 |
| Collection made |
To determine
(2)
Concept introduction:
Money (cash) forecast: Money (cash) acceptance forecast amounts to the outflow and inflow of money (cash) in the forecast period to ascertain the equilibrium of money (cash) commitment.
To prepare:
Budget inventory (ending) for April, May, June and July.
Expert Solution
Answer to Problem 7PSA
| Particulars | April $ | May $ | June $ | July $ |
| Closing inventory | 400 | 1200 | 1000 | 760 |
Explanation of Solution
Computation of forecasted (budgeted) closing stock for April, May, June, and July.
| Particulars | April $ | May $ | June $ | July $ | August $ |
| Unit | 4000 | 2000 | 6000 | 5000 | 3800 |
| Closing inventory(20*of succeeding month sales) | 400 | 1200 | 1000 | 760 | - |
To determine
(3)
Concept introduction:
Money (cash) forecast: Money (cash) acceptance forecast amounts to the outflow and inflow of money (cash) in the forecast period to ascertain the equilibrium of money (cash) commitment.
To prepare:
Purchase budget for May, June and July.
Expert Solution
Answer to Problem 7PSA
| Particulars | April $ | May $ | June $ | July $ |
| Units to be bought | 4500 | 2900 | 5900 | 4860 |
Explanation of Solution
Purchase forecast (budget):
| Particulars | April $ | May $ | June $ | July $ | August $ |
| Units | 4000 | 2000 | 6000 | 5000 | 3800 |
| Less-beginning inventory | - | 400 | 1200 | 1000 | 760 |
| Add-ending inventory | 400 | 1200 | 1000 | 760 | - |
| Add-stock for safety | 100 | 100 | 100 | 100 | 100 |
| Units to be bought | 4500 | 2900 | 5900 | 4860 | 3140 |
To determine
(4)
Concept introduction:
Money (cash) forecast: Money (cash) acceptance forecast amounts to the outflow and inflow of money (cash) in the forecast period to ascertain the equilibrium of money (cash) commitment.
To prepare:
Table showing cash payment in June and July.
Expert Solution
Answer to Problem 7PSA
| Months | June$ | July$ |
| Amount | 484000 | 594000 |
Explanation of Solution
Cash schedule for payment
| Particulars | April$ | May$ | June$ | July$ | August$ |
| Unit | 4000 | 2000 | 6000 | 5000 | 3800 |
| Price /unit | 110 | 110 | 110 | 110 | 110 |
| Purchase | 440000 | 220000 | 660000 | 550000 | 418000 |
| Amount |
To determine
(5)
Concept introduction:
Money (cash) forecast: Money (cash) acceptance forecast amounts to the outflow and inflow of money (cash) in the forecast period to ascertain the equilibrium of money (cash). commitment.
To prepare:
Expert Solution
Answer to Problem 7PSA
Total of cash in June and July is same i.e. 100000
Explanation of Solution
Cash budget
| Particulars | June | July |
| Cash received | 597600 | 820800 |
| Less-cash paid | 660000 | 550000 |
| Less-expenses for sales | 1320000 | |
| Amount for loan | 1382400 | 1377488 |
| Less-interest paid amount | - | 1658888 |
| Cash | 100000 | 100000 |
To determine
(6)
Concept introduction:
Money (cash) forecast: Money (cash) acceptance forecast amounts to the outflow and inflow of money (cash) in the forecast period to ascertain the equilibrium of money (cash) commitment.
To discuss:
Reasons that would help the firm manage cash for the month of May.
Expert Solution
Answer to Problem 7PSA
If it was known to the company that it required more borrowing in June, i.e., more than $18000 as per the cash budget of the company in May itself, then company would have made less investment in May so that borrowing would have not been required that much in June. Also, the company would have realised its amount receivable from the customer to whom credit sales has been made.
Explanation of Solution
If it was known to the company that it required more borrowing in June, i.e., more than $18000 as per the cash budget of the company in May itself, then the company would have made less investment in May so that the borrowing would have not been required that much in June. Also, the company would have realised its amount receivable from the customer to whom credit sales has been made.
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Corning Incorporated sells its product for $24 per unit. Its actual and projected sales follow:
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Dollars
January (actual)
18,500
$444,000
February (actual)
23,000
552,000
March (budgeted)
19,800
475,200
April (budgeted)
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Here is added information about Corning’s operations:
All sales are on credit. Recent experience show that 35% of sales are collected in the month of the sale, 45% in the month following the sale, 17% in the second month after the sale, and 3% prove to be uncollectible. The product’s purchase price is $15 per unit. All payments are payable within 21 days. Thus 30% of purchases in any given month are paid for in that month, with the remaining 70% paid for in the following month. The company has a policy to maintain an ending inventory of 20% of the next month’s projected sales plus a safety stock of 100 units. The January 31 and February 28…
Corning Incorporated sells its product for $24 per unit. Its actual and projected sales follow:
Units
Dollars
January (actual)
18,500
$444,000
February (actual)
23,000
552,000
March (budgeted)
19,800
475,200
April (budgeted)
18,950
454,800
May (budgeted)
22,000
528,000
Here is added information about Corning’s operations:
All sales are on credit. Recent experience show that 35% of sales are collected in the month of the sale, 45% in the month following the sale, 17% in the second month after the sale, and 3% prove to be uncollectible. The product’s purchase price is $15 per unit. All payments are payable within 21 days. Thus 30% of purchases in any given month are paid for in that month, with the remaining 70% paid for in the following month. The company has a policy to maintain an ending inventory of 20% of the next month’s projected sales plus a safety stock of 100 units. The January 31 and February 28…
Chapter 7 Solutions
MANAGERIAL ACCOUNTING FUND. W/CONNECT
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