Question

Mast Corporation seeks your assistance in developing cash and other budget information for May, June, and July. At April 30, the company had cash of $11,000, accounts receivable of $890,000, inventories of $117,720, and accounts payable of $33,263. The budget is to be based on the following assumptions.

Each month’s sales are billed on the last day of the month.

Customers are allowed a 2 percent discount if payment is made within 10 days after the billing date. Receivables are recorded in the accounts at their gross amounts (not net of discounts).

The billings are collected as follows: 75 percent within the discount period, 10 percent by the end of the month, and 12 percent by the end of the following month. Three percent is uncollectible.

Purchase data are as follows.

Of all purchases of merchandise and selling, general, and administrative expenses, 59 percent is paid in the month purchased and the remainder in the following month.

The number of units in each month’s ending inventory equals 120 percent of the next month’s units of sales.

The cost of each unit of inventory is $9.

Selling, general, and administrative expenses, of which $4,000 is depreciation, equal 15 percent of the current month’s sales.

Actual and projected sales follow:

	Dollars		Units
March	$	151,200	10,800
April		211,400	15,100
May		152,600	10,900
June		173,600	12,400
July		168,000	12,000
August		14,800	12,200
d. Compute the budgeted cash disbursements during June. (Do not round intermediate calculations.)

e. Compute the budgeted number of units of inventory to be purchased during July.

Answer 1

Sales Budget
	May	June	July	August
Budgeted Units sales	10,900	12,400	12,000	12,200
Selling price per unit $	$14	$14	$14
Total Sales	$152,600	$173,600	$168,000
Schedule of Expected Cash Collection
	May	June	July	Total
Accounts Receivable Beginning Balance ( 12% collected)	$863,300			$863,300
May Sales (75% less 2% discount and 10% in next month, 12% in second next month)		$127,421	$18,312	$145,733
June Sales			$144,956	$144,956
Total Cash collections	$863,300	$127,421	$163,268	$1,153,989
Purchase budget
	May	June	July	August
Budgeted units Sales	10,900	12,400	12,000	12,200
Add: Desired Finished goods inventory	14,880	14,400	14,640
Total Needs (a+b)	25,780	26,800	26,640
less: Beginning Inventory (b)	13,080	14,880	14,400
Required Purchases (c-d)	12,700	11,920	12,240
Cost of Inventory $	$9	$9	$9
Cost of raw material to be purchased	$114,300	$107,280	$110,160
Selling, general and administrative Budget
	May	June	July	Total
Budgeted Sales	$152,600	$173,600	$168,000	$494,200
Selling, General and Administrative Expenses (15% of Months Sales)	$22,890	$26,040	$25,200	$74,130
Depreciation	$4,000	$4,000	$4,000	$12,000
Cash SG&A Expenses	$18,890	$22,040	$21,200	$62,130
Schedule of Expected Cash Payment
	May	June	July	Total
Accounts Payable Beginning balance	$33,263			$33,263
May Purchases (59% in current month, 41% next month)	$67,437	$46,863		$114,300
June Purchases		$63,295	$43,985	$107,280
July Purchases			$64,994	$64,994
Selling and Distribution Expenses (59% in current month, 41% next month)
May	$11,145	$7,745		$18,890
June		$13,004	$9,036	$22,040
July			$12,508	$12,508
Total Cash Payment	$111,845	$130,907	$130,524	$373,275
CASH BUDGET
	May	June	July	Total
Estimated cash receipt from:
Collections of accounts receivable	$863,300	$127,421	$163,268	$1,153,989
Total cash receipts	$863,300	$127,421	$163,268	$1,153,989
Estimated cash payments for:
Inventory Purchases	$100,700	$110,158	$108,979	$319,837
Selling and administrative expenses	$11,145	$20,749	$21,544	$53,438
Total Cash payments	$111,845	$130,907	$130,524	$373,275
Cash increase (decrease)	$751,455	($3,486)	$32,744	$780,714
Cash at the beginning of the month	11000	$762,455	$758,969	$791,714
Cash balance at the end of month	$762,455	$758,969	$791,714	$1,572,427