Question

The following data relate to the operations of Soper Company, a wholesale distributor of consumer goods...

The following data relate to the operations of Soper Company, a wholesale distributor of consumer goods as of March 31:

  Cash $ 8,000
  Accounts receivable 20,000
  Inventory 36,000
  Building and equipment, net 120,000
  Accounts payable 21,750
  Common shares 150,000
  Retained earnings 12,250
a. The gross margin is 25% of sales.
b. Actual and budgeted sales data are as follows:
  March (actual) $ 50,000
  April $ 60,000
  May $ 72,000
  June $ 90,000
  July $ 48,000
c.

Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales.

d.

Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold.

e.

One-half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory.

f.

Monthly expenses are as follows: commissions, 12% of sales; rent, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $900 per month (includes depreciation on new assets).

g.

Equipment costing $1,500 will be purchased for cash in April.

h.

The company must maintain a minimum cash balance of $4,000. An open line of credit is available at a local bank. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month. The monthly interest rate is 1%. Interest must be paid at the end of each month based on the total loans outstanding for that month.

   

Required:

Using the data above, complete the following statements and schedules for the second quarter

1. Schedule of expected cash collections:

       

2-a. Merchandise purchases budget :

              

2-b.

Schedule of expected cash disbursements for merchandise purchases:

             

3.

Schedule of expected cash disbursements for selling and administrative expenses:

        

4.

Cash budget: (Round your intermediate calculations and final answers to the nearest whole dollar. Also, round up your interest calculations to the next whole dollar amount. Cash deficiency, repayments and interest should be indicated by a minus sign.)

          

5.

Prepare an absorption costing income statement for the quarter ending June 30.

           

6. Prepare a balance sheet as of June 30.

      

Homework Answers

Answer #1
Solution:
Soper Company
Sales Budget
For the Quarter ended June 30
April May June Quarter
Budgeted Sales in Dollars 60000 72000 90000 222000
Total Budgeted Sales 60000 72000 90000 222000
Soper Company
Expected Cash Collection
For the Quarter ended June 30
April May June Quarter
Account Receivable 03/31(40% of 50000) 20000 20000
April - Sales
60% of 60000 36000 36000
40% of 60000 24000 24000
May - Sales
60% of 72000 43200 43200
40% of 72000 28800 28800
June - Sales
60% of 90000 54000 54000
Total Cash Collection 56000 67200 82800 206000
Soper Company
Inventory Purchase Budget
For the Quarter ended June 30
April May June Quarter
Budgeted Cost of Goods Sold(75% of Sales) 45000 54000 67500 166500
Add: Desired Ending Inventory(80% of Next Month's COGS) 43200 54000 28800 28800 =48000*0.75*0.8 = 28800
Total Needs 88200 108000 96300 195300
Less: Beginning Inventory 36000 43200 54000 36000
Required Inventory Purchase 52200 64800 42300 159300
Soper Company
Cash Disbursement for Purchase
For the Quarter ended June 30
April May June Quarter
March Purchase 21750 21750
April Purchase(50% of 52200) 26100 26100 52200
May Purchase(50% 64800) 32400 32400 64800
June Purchase(50% of 42300) 21150 21150
Total cash Disbursement for Purchase 47850 58500 53550 159900
*Account Payable of March - for Purchase of 21150 will be paid in April
Soper Company
Cash Disbursement for operating Expenses
For the Quarter ended June 30
April May June Quarter
Rent 2500 2500 2500 7500
Commission (12% of Sales) 7200 8640 10800 26640
Other Expenses(6% of Sales) 3600 4320 5400 13320
Total Cash Disbursement 13300 15460 18700 47460
Soper Company
Cash Budget
For the Quarter ended June 30
April May June Quarter
Beginning Cash Balance 8000 4000 4000 8000
Add: Cash Collection 56000 67200 82800 206000
Total Cash Available 64000 71200 86800 214000
Less: Cash Disbursement
Inventory Purchase 47850 58500 53550 159900
Operating Expense 13300 15460 18700 47460
Equipment Purchase 1500 0 0 1500
Total Cash Disbursement 62650 73960 72250 208860
Excess/Deficiency 1350 -2760 14550 5140
Financing:
Borrowing 2677 6855 0 9532
Repayments 0 0 -9532 -9532
Interest -27 -95 -95 -217
Total Financing 2650 6760 -9627 -217
Ending Cash Balance 4000 4000 4923 4923
Soper Company
Budgeted Income Statement
For the Quarter ended June 30
Sales 222000
Less: Cost of Goods Sold 166500
Gross Margin 55500
Less: Operating Expenses 47460
Depreciation 2700
Operating Income 5340
Less: Interest Expense 217
Net Income 5123
Hillyard Company
Budgeted Balance Sheet
For the Quarter ended June 30
Current Assets
Cash 4923
Account Receivable(40% of 90000) 36000
Inventory 28800
Total Current Assets 69723
Building and Equipment 118800
(Beginning 120000+New purchase 1500-Depreciation 2700)
Total Assets 188523
Liabilities and Equity
Account Payable(50% of 42300) 21150
Equity:
Common Stock 150000
Retained Earnings:
Beginning 12250
add: Net Income 5123
Total 17373
Less: Cash Dividend 0 17373
Total Liability and Equity 188523
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