Question

Monthly Cash Budget
Grove, Inc. is a wholesaler for its only product, deluxe wireless electric drills, which sell for $93 each and cost Grove $55 each. On December 1, 2016, Grove's management requested a cash budget for December. The following selected account balances at November 30, 2016, were gathered by the accounting department:

Cash				$135,000
Marketable securities (at cost)				210,000
Accounts receivable (all trade)				1,710,000
Inventories (15,000 units)				825,000
Operating expenses payable				140,400
Accounts payable (all merchandise)				583,200
Note payable (due 12/31/2016)				393,000

Actual sales for the months of October and November were 20,000 and 30,000 units, respectively. Projected unit sales for December and January are 50,000 and 40,000, respectively. Experience indicates that 50% of sales should be collected in the month of sale, 30% in the month following sale, and the balance in the second month following sale. Uncollectible accounts, returns, and allowances are negligible.

Planned purchases should provide ending inventories equal to 30% of next month's unit sales volume. Approximately 70% of the purchases are paid for in the month of purchase and the balance in the following month.

Monthly operating expenses are budgeted at $10.10 per unit sold plus a fixed amount of $189,000 including depreciation of $81,000. Except for depreciation, 60% of operating expenses are paid in the month incurred and the balance in the following month. Interest expense is included in operating expenses.

Special anticipated year-end transactions include the following:
1. Declaration of a $22,500 cash dividend to be paid 2 weeks after the December 20 date of record.
2. Sale of one-half of the marketable securities held on November 30 a gain of $21,000 is anticipated.
3. Pay off the note payable due December 31, 2016.
4. Trade-in of an old computer originally costing $675,000 and now having accumulated depreciation of $540,000 at a gain of $157,500 on a new computer costing $1,355,000. Sufficient cash will be paid at the time of trade-in so that only 50% of the total price will have to be financed.
5. Grove's treasurer has a policy of maintaining a minimum month-end cash balance of $135,000 but wants to raise this to $225,000 at December 31. She has a standing arrangement with the bank to borrow any amount up to a limit of $450,000.

Prepare a cash budget for Grove, Inc., for December 2016.

Collections in December from customers:

From October sales	Answer
From November sales	Answer
From December sales	Answer
Total collections	Answer

Payments on account for merchandise purchases:

	November	December
Unit Sales	Answer	Answer
Ending inventories	Answer	Answer
Total units to be available	Answer	Answer
Beginning inventories	Answer	Answer
Units to be purchased	Answer	Answer
Total dollar purchases	Answer	Answer
Portion paid in December	Answer	Answer

Payment of operating expenses:

	November	December
Total variable operating expenses	Answer	Answer
Fixed operating expenses	Answer	Answer
Total operating expenses	Answer	Answer
Monthly depreciation	Answer	Answer
Operating expenses requiring payment	Answer	Answer
Amounts to be paid in December	Answer	Answer

Cash required at time of computer purchase:

Cost of new computer		Answer
Book value of old computer	Answer
Gain on trade-in	Answer
Total trade-in allowance		Answer
Balance owing at trade-in		Answer
Portion to be financed		Answer
Cash payment required		Answer

Grove, Inc. Cash Budget For the Month Ended December 31, 2016
Beginning cash balance	Answer
Cash receipts:
Collections from customers (calculated above)	Answer
Answer

	Answer
Short-term borrowing	Answer
Cash available	Answer
Cash disbursements:
Payments on accounts payable (calculated above)	Answer
Payments of operating expenses payable (calculated above)	Answer
Down payment on computer (calculated above)	Answer
Answer

	Answer
Total cash disbursements	Answer
Ending cash balance	Answer

Answer 1

From October sales	360,000
From November sales	810,000
From December sales	2,250,000
Total collections	3,420,000

Payments on account for merchandise purchases:

	November	December
Unit Sales	30,000	50,000
Ending inventories	15,000	12,000
Total units to be available	45,000	62,000
Beginning inventories	9,000	15,000
Units to be purchased	36,000	47,000
Total dollar purchases	1,944,000	2,538,000
Portion paid in December	583,000	1,776,600

Payment of operating expenses:

	November	December
Total variable operating expenses	243,000	405,000
Fixed operating expenses	189,000	189,000
Total operating expenses	432,000	594,000
Monthly depreciation	81,000	81,000
Operating expenses requiring payment	351,000	513,000
Amounts to be paid in December	140,400	307,800

Cash required at time of computer purchase:

Cost of new computer		1,350,000
Book value of old computer	135,000
Gain on trade-in	157,500
Total trade-in allowance		292,500
Balance owing at trade-in		1,057,500
Portion to be financed		675,000
Cash payment required		382,500

Grove, Inc. Cash Budget For the Month Ended December 31, 2016
Beginning cash balance	135,000
Cash receipts:
Collections from customers (calculated above)	3,420,000
Answer

Sale on Securities	126,000
Short-term borrowing	127,500
Cash available	38,08,500
Cash disbursements:
Payments on accounts payable (calculated above)	2,359,800
Payments of operating expenses payable (calculated above)	448,200
Down payment on computer (calculated above)	382,500
Answer

Payoff of note payable	393,000
Total cash disbursements	3,583,500
Ending cash balance	225,000