Question

Abacus Company sells its product for $180 per unit. Its actual and projected sales follow.

	Units	Dollars
April (actual)	6,000	$1,080,000
May (actual)	2,000	360,000
June (budgeted)	7,000	1,260,000
July (budgeted)	6,500	1,170,000
August (budgeted)	3,800	684,000

All sales are on credit. Recent experience shows that 22% of credit sales is collected in the month of the sale, 48% in the month after the sale, 28% in the second month after the sale, and 2% proves to be uncollectible. The product’s purchase price is $110 per unit. All purchases are payable within 12 days. Thus, 60% of purchases made in a month is paid in that month and the other 40% is paid in the next month. The company has a policy to maintain an ending monthly inventory of 24% of the next month’s unit sales plus a safety stock of 195 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,692,000 and are paid evenly throughout the year in cash. The company’s minimum cash balance at month-end is $90,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $90,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 12% interest rate. On May 31, the loan balance is $45,500, and the company’s cash balance is $90,000.

1.

value:
10.00 points

Required information

Required:
1.	Prepare a table that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July. (Omit the "$" & "%" signs in your response.)

Cash collections of credit sales (accounts receivable)

From sales in	Total	% Collected	June	July
April	$	%	$
May
				$
June
July
Total collected			$	$

References

WorksheetLearning Objective: 23-C2 Describe a master budget and the process of preparing it.

Difficulty: 3 HardLearning Objective: 23-P2 Link both operating and capital expenditures budgets to budgeted financial statements.

Check my work

2.

value:
10.00 points

Required information

2.	Prepare a table that shows the computation of budgeted ending inventories (in units) for April, May, June, and July. (Omit the "%" sign in your response.)

Budgeted ending inventories (in units)

	April	May	June	July
Next month’s budgeted sales
Ratio of inventory to future sales	%	%	%	%
Budgeted “base” ending inventory
Plus safety stock
Budgeted ending inventory

References

WorksheetLearning Objective: 23-C2 Describe a master budget and the process of preparing it.

Difficulty: 3 HardLearning Objective: 23-P2 Link both operating and capital expenditures budgets to budgeted financial statements.

Check my work

3.

value:
10.00 points

Required information

3.	Prepare the merchandise purchases budget for May, June, and July. Report calculations in units and then show the dollar amount of purchases for each month. (Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)

  

ABACUS COMPANY Merchandise Purchases Budgets For May, June, and July
	May	June	July
(Click to select)Budgeted purchasesPayments on purchasesBeginning inventoryBudgeted ending inventoryBudgeted beginning inventory
(Click to select)Budgeted beginning inventoryPayments on purchasesAdd: Budgeted salesBudgeted purchasesDeduct: Budgeted sales
Required units of available merchandise
(Click to select)Budgeted purchases (units)Budgeted ending inventoryBudgeted salesAdd: Beginning inventoryDeduct: Beginning inventory
(Click to select)Beginning inventoryBudgeted beginning inventoryBudgeted salesBudgeted ending inventoryBudgeted purchases
(Click to select)Budgeted salesPayments on purchasesBudgeted ending inventoryBudgeted cost per unitBeginning inventory	$	$	$
Budgeted cost of merchandise purchases	$	$	$

References

WorksheetLearning Objective: 23-C2 Describe a master budget and the process of preparing it.

Difficulty: 3 HardLearning Objective: 23-P2 Link both operating and capital expenditures budgets to budgeted financial statements.

Check my work

4.

value:
10.00 points

Required information

4.	Prepare a table showing the computation of cash payments on product purchases for June and July. (Round your answers to the nearest dollar amount. Omit the "$" & "%" signs in your response.)

Cash payments on product purchases (for June and July)

From purchases in	Total	% Paid	June	July
May	$	%	$
June
				$
July
Total Paid			$	$

References

WorksheetLearning Objective: 23-C2 Describe a master budget and the process of preparing it.

Difficulty: 3 HardLearning Objective: 23-P2 Link both operating and capital expenditures budgets to budgeted financial statements.

Check my work

5.

value:
10.00 points

Required information

5.

Prepare a cash budget for June and July, including any loan activity and interest expense. Compute the loan balance at the end of each month. (Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive values except preliminary cash balance and any repayments to bank which should be indicated by a minus sign. Round intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

  

ABACUS COMPANY Cash Budget June and July
	June	July
(Click to select)Beginning cash balancePayments on purchasesInterest expenseSelling and administrative expensesAdditional loan from bank	$	$
(Click to select)Interest expenseCash receipts from customersAdditional loan from bankPayments on purchasesSelling and administrative expenses
Total available cash
Cash disbursements
(Click to select)Repayment of loan to bankPayments on purchasesCash receipts from customersPreliminary cash balanceAdditional loan from bank
(Click to select)Repayment of loan to bankSelling and administrative expensesCash receipts from customersPreliminary cash balanceAdditional loan from bank
(Click to select)Repayment of loan to bankCash receipts from customersAdditional loan from bankPreliminary cash balanceInterest expense
Total disbursements
(Click to select)Interest expenseCash receipts from customersPayments on purchasesPreliminary cash balanceSelling and administrative expenses
(Click to select)Payments on purchasesCash receipts from customersAdditional loan from bankSelling and administrative expensesInterest expense
(Click to select)Payments on purchasesInterest expenseSelling and administrative expensesCash receipts from customersRepayment of loan to bank
(Click to select)Ending cash balanceAdditional loan from bankEnding loan balancePayments on purchasesPreliminary cash balance	$	$
(Click to select)Ending cash balanceEnding loan balancePreliminary cash balanceAdditional loan from bankPayments on purchases	$	$

Answer 1