Managerial Accounting 1B
Financial
and Managerial Accounting
Chapter-20

1.
Exercise 20-5
Computing budgeted cash payments for purchases L.O. P1

Powerdyne Company’s cost of goods
sold is consistently 60% of sales. The company plans to carry ending
merchandise inventory for each month equal to 40% of the next month’s
budgeted cost of good sold. All merchandise is purchased on credit, and 50%
of the purchases made during a month is paid for in that month. Another 35%
is paid for during the first month after purchase, and the remaining 15% is
paid for during the second month after purchase. Expected sales are: August
(actual), $150,000; September (actual), $350,000; October (estimated),
$200,000; November (estimated), $300,000.

Cash payments for
purchases

2.
Exercise 20-6
Computing budgeted purchases and costs of goods sold L.O. P1

Sand Dollar Company purchases all
merchandise on credit. It recently budgeted the following month-end accounts
payable balances and merchandise inventory balances. Cash payments on
accounts payable during each month are expected to be: May, $1,300,000; June,
$1,450,000; July, $1,350,000; and August, $1,400,000.

Accounts
Payable

Merchandise
Inventory

May 31

$

120,000

$

250,000

June 30

170,000

400,000

July 31

200,000

300,000

August 31

160,000

330,000

1.

Compute the budgeted amounts of
merchandise purchases for June, July, and August.(Omit the “$” sign in your response.)

June

July

August

Budgeted merchandise
purchases

$

$

$

2.

Compute the budgeted amounts of
cost of goods sold for June, July, and August.(Omit the “$” sign in your response.)

June

July

August

Budgeted cost of goods
sold

$

$

$

Explanation:
1.

Budgeted merchandise
purchases

2.

Budgeted cost of goods
sold

3.

Exercise 20-16 Cash
budget L.O. P1

Kool-Ray is preparing its master
budget for the quarter ended September 30. Budgeted sales and cash payments
for merchandise for the next three months follow:

July

August

September

Budgeted sales

$

64,000

$

80,000

$

48,000

Budgeted cash payments
for merchandise

40,400

33,600

34,400

Sales are 20% cash and 80% on
credit. All credit sales are collected in the month following the sale. The
June 30 balance sheet includes balances of $12,000 in cash; $45,000 in
accounts receivable; $4,500 in accounts payable; and a $2,000 balance in
loans payable. A minimum cash balance of $12,000 is required. Loans are
obtained at the end of any month when a cash shortage occurs. Interest is 1%
per month based on the beginning of the month loan balance and is paid at
each month-end. If an excess balance of cash exists, loans are repaid at the
end of the month. Operating expenses are paid in the month incurred and
consist of sales commissions (10% of sales), office salaries ($4,000 per
month), and rent ($6,500 per month).

(1)

Prepare a cash receipts budget for
July, August, and September. (Input all
amounts as positive values. Omit the “$” sign in your response.)

(2)

Prepare a cash budget for each of the
months of July, August, and September.(Input
all amounts as positive values. Round your answers to the nearest dollar
amount. Leave no cells blank – be certain to enter “0” wherever
required. Omit the “$” sign in your response.)

Problem 20-5A:
Preparation of a complete master budget L.O. C2, P1, P2
[The following information applies to the questions displayed
below.]

Near the end of 2011, the
management of Simid Sports Co., a merchandising company, prepared the
following estimated balance sheet for December 31, 2011.

To prepare a master budget for
January, February, and March of 2012, management gathers the following
information.

a.

Simid Sports’ single product is
purchased for $30 per unit and resold for $55 per unit. The expected
inventory level of 2,500 units on December 31, 2011, is more than
management’s desired level for 2012, which is 20% of the next month’s
expected sales (in units). Expected sales are: January, 3,500 units;
February, 4,500 units; March, 5,500 units; and April, 5,000 units.

b.

Cash sales and credit sales
represent 25% and 75%, respectively, of total sales. Of the credit sales, 60%
is collected in the first month after the month of sale and 40% in the second
month after the month of sale. For the December 31, 2011, accounts receivable
balance, $62,500 is collected in January and the remaining $200,000 is
collected in February.

c.

Merchandise purchases are paid for
as follows: 20% in the first month after the month of purchase and 80% in the
second month after the month of purchase. For the December 31, 2011, accounts
payable balance, $40,000 is paid in January and the remaining $140,000 is
paid in February.

d.

Sales commissions equal to 20% of
sales are paid each month. Sales salaries (excluding commissions) are $30,000
per year.

e.

General and administrative
salaries are $72,000 per year. Maintenance expense equals $1,000 per month
and is paid in cash.

f.

Equipment reported in the December
31, 2011, balance sheet was purchased in January 2011. It is being
depreciated over eight years under the straight-line method with no salvage
value. The following amounts for new equipment purchases are planned in the
coming quarter: January, $18,000; February, $48,000; and March, $14,400. This
equipment will be depreciated under the straight-line method over eight years
with no salvage value. A full month’s depreciation is taken for the month in
which equipment is purchased.

g.

The company plans to acquire land
at the end of March at a cost of $75,000, which will be paid with cash on the
last day of the month.

h.

Simid Sports has a working
arrangement with its bank to obtain additional loans as needed. The interest
rate is 12% per year, and interest is paid at each month-end based on the
beginning balance. Partial or full payments on these loans can be made on the
last day of the month. The company has agreed to maintain a minimum ending
cash balance of $12,500 in each month.

i.

The income tax rate for the
company is 40%. Income taxes on the first quarter’s income will not be paid
until April 15.

4.Problem 20-5A Part 1

1.

Monthly sales budgets.(Omit the “$” sign in your response.)

5.
Problem 20-5A Part 2

2.

Monthly merchandise purchases
budgets.(Units to be deducted should be
indicated with a minus sign. Omit the “$” & “%” signs
in your response.)

6.Problem 20-5A Part 3

3.

Monthly selling expense
budgets.(Omit the “$” &
“%” signs in your response.)

7.Problem 20-5A Part 4

4.

Monthly general and administrative
expense budgets.(Do not round your
intermediate calculations. Round your final answers to the nearest whole
dollar. Omit the “$” sign in your response.)

Explanation:
Depreciation expense calculations

8.
Problem 20-5A Part 5

5.

Monthly capital expenditures
budgets.(Leave no cells blank – be certain
to enter “0” wherever required. Input all amounts as positive
values. Omit the “$” sign in your response.)

9.
Problem 20-5A Part 6

6.

Monthly cash budgets.(Leave no cells blank – be certain to enter “0”
wherever required. Input all amounts as positive values except negative
preliminary cash balance and repayment of loan to bank which should be
indicated by a minus sign. Omit the “$” sign in your response.)

10.Problem 20-5A Part
11.Problem 20-5A Part 8

8.

Budgeted balance sheet as of March
31, 2012.(Input all amounts as positive
values. Be sure to list the assets in order of their liquidity. Leave no
cells blank – be certain to enter “0” wherever required. Omit the
“$” sign in your response.)