Question

Abacus Company sells its product for $210 per unit. Its actual and projected sales follow.

	Units	Dollars
April (actual)	6,500	$1,365,000
May (actual)	2,400	504,000
June (budgeted)	7,500	1,575,000
July (budgeted)	4,500	945,000
August (budgeted)	4,100	861,000

All sales are on credit. Recent experience shows that 26% of credit sales is collected in the month of the sale, 44% in the month after the sale, 26% in the second month after the sale, and 4% proves to be uncollectible. The product’s purchase price is $110 per unit. All purchases are payable within 13 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 22% of the next month’s unit sales plus a safety stock of 90 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,896,000 and are paid evenly throughout the year in cash. The company’s minimum cash balance at month-end is $84,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $84,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 11% interest rate. On May 31, the loan balance is $33,000, and the company’s cash balance is $84,000.

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 ending inventoryBeginning inventoryPayments on purchasesBudgeted beginning inventoryBudgeted purchases
(Click to select)Budgeted beginning inventoryBudgeted purchasesDeduct: Budgeted salesAdd: Budgeted salesPayments on purchases
Required units of available merchandise
(Click to select)Budgeted ending inventoryBudgeted purchases (units)Add: Beginning inventoryDeduct: Beginning inventoryBudgeted sales
(Click to select)Budgeted purchasesBudgeted beginning inventoryBudgeted salesBudgeted ending inventoryBeginning inventory
(Click to select)Payments on purchasesBudgeted cost per unitBudgeted ending inventoryBudgeted salesBeginning 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)Interest expenseAdditional loan from bankPayments on purchasesSelling and administrative expensesBeginning cash balance	$	$
(Click to select)Additional loan from bankInterest expenseCash receipts from customersPayments on purchasesSelling and administrative expenses
Total available cash
Cash disbursements
(Click to select)Cash receipts from customersRepayment of loan to bankAdditional loan from bankPayments on purchasesPreliminary cash balance
(Click to select)Cash receipts from customersPreliminary cash balanceSelling and administrative expensesAdditional loan from bankRepayment of loan to bank
(Click to select)Cash receipts from customersRepayment of loan to bankInterest expenseAdditional loan from bankPreliminary cash balance
Total disbursements
(Click to select)Cash receipts from customersPayments on purchasesSelling and administrative expensesInterest expensePreliminary cash balance
(Click to select)Selling and administrative expensesInterest expenseAdditional loan from bankPayments on purchasesCash receipts from customers
(Click to select)Payments on purchasesInterest expenseCash receipts from customersRepayment of loan to bankSelling and administrative expenses
(Click to select)Preliminary cash balanceAdditional loan from bankEnding loan balancePayments on purchasesEnding cash balance	$	$
(Click to select)Additional loan from bankEnding cash balancePayments on purchasesEnding loan balancePreliminary cash balance	$	$

Answer 1

ABACUS COMPANY
Budgeted Collections
for June and July
	Total	June		July
		%	Amount	%	Amount
April Sales	1365000	26%	354900
May Sales	504000	44%	221760	26%	131040
June Sales	1575000	26%	409500	44%	693000
July sales	945000			26%	245700
Total Collections			986160		1069740
ABACUS COMPANY
Budgeted Ending Inventories
For April, May, june and july
	April	May	June	July
Next month's budgeted sales	2400	7500	4500	4100
Ratio of inventory to future sales	22%	22%	22%	22%
Budgeted Base ending Inventory	528	1650	990	902
Plus : safety stock	90	90	90	90
Budgeted Ending Inventory	618	1740	1080	992
ABACUS COMPANY
Merchandise Purchase Budget
For May, June and July
	May	June	July
Budgeted sales	2400	7500	4500
Add: Budgeted Ending Inventory	1740	1080	992
Total Units required	4140	8580	5492
Less: Budgeted Beginning Inventory	618	1740	1080
Budgeted Purchase units	3522	6840	4412
Purchase price per unit - $	110	110	110
Budgeted cost of merchandise purchases	387420	752400	485320
Cash payment on product purchases
	Total	June		July
		%	Amount	%	Amount
May Purchases	387420	40%	154968
June Purchases	752400	60%	451440	40%	300960
July Purchases	485320			60%	291192
Total payments for purchases			606408		592152
ABACUS COMPANY
Merchandise Purchase Budget
June and July
	June	July
Beginning Cash balance	84000	272450
Add; Cash collections from sale	986160	1069740
Total cash available for disbursements	1070160	1342190
Cash Payments:
For merchandise purchases	606408	592152
For selling and administration expenses	158000	158000
For interest	303
Total disbursements	764711	750152
Cash surplus / (deficit)	305450	592038
Finance
Borrowing / (repayment)	-33000	0
Ending Cash balance	272450	592038