|
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.
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|
Required: |
| Using the data above, complete
the following statements and schedules for the second quarter |
1. Schedule of expected cash collections
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|
|
Schedule of Expected Cash Collections |
|
|
April |
May |
June |
Quarter |
| Cash sales |
$36,000 |
$43,200 |
$54,000 |
$133,200 |
| Credit sales* |
20,000 |
24,000 |
28,800 |
72,800 |
| Total
collections |
$56,000 |
$67,200 |
$82,800 |
$206,000 |
| *40% of prior
month's sales |
|
2. Merchandise purchases budget
|
|
|
|
April |
May |
June |
Quarter |
| Budgeted cost of
goods sold* |
$45,000 |
$54,000 |
$67,500 |
$166,500 |
|
Add desired ending inventory† |
43,200 |
54,000 |
28,800 |
28,800 |
| Total needs |
$88,200 |
$108,000 |
$96,300 |
$195,300 |
| Less beginning
inventory |
36,000 |
43,200 |
54,000 |
36,000 |
|
Required purchases |
$52,200 |
$64,800 |
$42,300 |
$159,300 |
| *For April sales:
$60,000 sales x 75% cost ratio = $45,000. |
| †$54,000 x 80% =
$43,200. |
|
2b. Schedule of expected cash disbursements for merchandise
purchases:
|
|
|
|
April |
May |
June |
Quarter |
| For March
purchases |
$21,750 |
|
|
$21,750 |
| For April
purchases |
26,100 |
26,100 |
|
52,200 |
| For May
purchases |
|
|
|
|
| For June
purchases |
|
|
|
|
| Total
cash disbursements for purchases |
$47,850 |
|
|
|
|
3. Schedule of expected cash disbursements for selling and
administrative expenses:
|
|
|
|
April |
May |
June |
Quarter |
| Commissions |
$7,200 |
|
|
|
| Rent |
2,500 |
|
|
|
| Other expenses |
3,600 |
|
|
|
| Total
disbursements |
13,300 |
|
|
|
|
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.)
|
|
|
Cash Budget |
April |
May |
June |
Quarter |
| Cash balance,
beginning |
$8,000 |
|
|
$8,000 |
| Add cash
collections |
56,000 |
|
|
|
| Total cash
available |
64,000 |
|
|
|
| Less cash
disbursements: |
|
|
|
|
| For inventory |
47,850 |
|
|
|
| For expenses |
13,300 |
|
|
|
| For equipment |
1,500 |
|
|
|
| Total cash
disbursements |
62,650 |
|
|
|
| Excess (deficiency)
of cash |
1,350 |
|
|
|
| Financing: |
|
|
|
|
| Borrowings |
|
|
|
|
| Repayments |
|
|
|
|
| Interest |
|
|
|
|
| Total
financing |
|
|
|
|
| Cash
balance, ending |
|
|
|
|
|
5. Prepare an absorption costing income statement for the
quarter ending June 30.
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|
|
SOPER COMPANY |
|
Income Statement |
|
For the Quarter Ended June 30 |
|
|
|
|
| Cost of goods
sold: |
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
0 |
| Operating
expenses: |
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|
|
|
|
|
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|
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|
0 |
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|
0 |
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|
|
$0 |
|
6. Prepare a balance sheet as of June 30.
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|
|
SOPER COMPANY |
|
Balance Sheet |
|
June 30 |
|
Assets |
| Current
assets: |
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| Total current
assets |
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| Total assets |
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|
Liabilities and Stockholders’ Equity |
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| Stockholders'
equity: |
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| Total liabilities
and stockholders’ equity |
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