Question

Abacus Company sells its product for $180 per unit. Its actual and projected sales follow.

	Units	Dollars
April (actual)	6,000	$1,080,000
May (actual)	2,000	360,000
June (budgeted)	7,000	1,260,000
July (budgeted)	6,500	1,170,000
August (budgeted)	3,800	684,000

All sales are on credit. Recent experience shows that 22% of credit sales is collected in the month of the sale, 48% in the month after the sale, 28% in the second month after the sale, and 2% proves to be uncollectible. The product’s purchase price is $110 per unit. All purchases are payable within 12 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 24% of the next month’s unit sales plus a safety stock of 195 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,692,000 and are paid evenly throughout the year in cash. The company’s minimum cash balance at month-end is $90,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $90,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 12% interest rate. On May 31, the loan balance is $45,500, and the company’s cash balance is $90,000.

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)Payments on purchasesBudgeted beginning inventoryBeginning inventoryBudgeted purchasesBudgeted ending inventory
(Click to select)Add: Budgeted salesPayments on purchasesBudgeted beginning inventoryBudgeted purchasesDeduct: Budgeted sales
Required units of available merchandise
(Click to select)Budgeted purchases (units)Add: Beginning inventoryBudgeted salesBudgeted ending inventoryDeduct: Beginning inventory
(Click to select)Budgeted salesBeginning inventoryBudgeted purchasesBudgeted ending inventoryBudgeted beginning inventory
(Click to select)Beginning inventoryBudgeted salesBudgeted ending inventoryPayments on purchasesBudgeted cost per unit	$	$	$
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 bankSelling and administrative expensesBeginning cash balancePayments on purchases	$	$
(Click to select)Payments on purchasesAdditional loan from bankCash receipts from customersInterest expenseSelling and administrative expenses
Total available cash
Cash disbursements
(Click to select)Additional loan from bankPayments on purchasesRepayment of loan to bankPreliminary cash balanceCash receipts from customers
(Click to select)Preliminary cash balanceSelling and administrative expensesRepayment of loan to bankAdditional loan from bankCash receipts from customers
(Click to select)Additional loan from bankInterest expenseCash receipts from customersRepayment of loan to bankPreliminary cash balance
Total disbursements
(Click to select)Selling and administrative expensesPayments on purchasesPreliminary cash balanceInterest expenseCash receipts from customers
(Click to select)Cash receipts from customersPayments on purchasesAdditional loan from bankInterest expenseSelling and administrative expenses
(Click to select)Cash receipts from customersInterest expenseSelling and administrative expensesPayments on purchasesRepayment of loan to bank
(Click to select)Additional loan from bankEnding cash balancePreliminary cash balancePayments on purchasesEnding loan balance	$	$
(Click to select)Ending cash balanceAdditional loan from bankPreliminary cash balanceEnding loan balancePayments on purchases	$	$

Answer 1