Question

1. Bonita Industries estimates its sales at 170000 units in the first quarter and that sales will increase by 21000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $25. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale.

Cash collections for the third quarter are budgeted at

a. $4346000.

b. $5205500.

c. $2979500.

d. $6216588.

2. Waterway Industries estimates its sales at 130000 units in the first quarter and that sales will increase by 24000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $35. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale.

Cash collections for the third quarter are budgeted at

a. $6078800.

b. $3462200.

c. $7102200.

d. $5108600.

3.

Whispering WindsCompany is considering two capital investment proposals. Estimates regarding each project are provided below:

	Project Soup	Project Nuts
Initial investment	$430000	$588000
Annual net income	30000	46000
Net annual cash inflow	110000	146000
Estimated useful life	5 years	6 years
Salvage value	0	0

The company requires a 10% rate of return on all new investments.

	Present Value of an Annuity of 1
Periods	9%	10%	11%	12%
5	3.89	3.791	3.696	3.605
6	4.486	4.355	4.231	4.111

The cash payback period for Project Nuts is

a. 6.39 years.

b. 4.03 years.

c. 14.33 years.

d. 5.38 years.

4. Coronado Industries reported the following information for 2019:

	October	November	December
Budgeted sales	$1180000	$1100000	$1380000

• All sales are on credit.
• Customer amounts on account are collected 50% in the month of sale and 50% in the following month.

How much cash will Coronado receive in November?

a. $1100000

b. $1140000

c. $1240000

d. $550000

5. The following information was taken from Bonita Industries’s cash budget for the month of July:

Beginning cash balance	$540000
Cash receipts	344000
Cash disbursements	574000

If the company has a policy of maintaining a minimum end of the month cash balance of $480000, the amount the company would have to borrow is

a. $310000.

b. $136000.

c. $60000.

d. $170000.

Answer 1

1.

b. $5,205,500

	Q1	Q2	Q3
SALES (UNITS)	170,000	191,000	212,000
SALE PRICE	25	25	25
TOTAL SALES	4,250,000	4,775,000	5,300,000
CASH SALES (40% OF TOTAL SALES)	1,700,000	1,910,000	2,120,000
CASH RECIEVED FROM CUSTOMER WITHIN QUARTER (70% OF CREDIT SALES)	1,785,000	2,005,500	2,226,000
CASH RECEIVED FROM PREVIOUS QUARTER		765,000	859,500
TOTAL CASH RECIEPTS			5,205,500

2.

A. $6,078,800

	Q1	Q2	Q3
SALES (UNITS)	130,000	154,000	178,000
SALE PRICE	35	35	35
TOTAL SALES	4,550,000	5,390,000	6,230,000
CASH SALES (40% OF TOTAL SALES)	1,820,000	2,156,000	2,492,000
CASH RECEIVED FROM CUSTOMER WITHIN QUARTER (70% OF CREDIT SALES)	1,911,000	2,263,800	2,616,600
CASH RECEIVED FROM PREVIOUS QUARTER		819,000	970,200
TOTAL CASH RECEIPTS			6,078,800

3.

B.4.03 YEARS

CASH PAYBACK PERIOD FOR PROJECT NUTS IS

INITIAL INVESTMENT/NET ANNUAL CASH INFLOW

= $588,000/146,000

=4.03 YEARS

4.

B. $1,140,000

	OCT	NOV
SALES	1,180,000	1,110,000
CASH COLLECTION (50% OF SALES)		550,000
50% OF 1,180,000		590,000
TOTAL		1,140,000

5.

D.$170,000

BEGINNING CASH BALANCE	540,000
CASH RECEIPTS	344,000
TOTAL CASH AVAILABLE	884,000
CASH DISBURSEMENTS	(574,000)
CASH BALANCE BEFORE FINANCING	310,000
MINIMUM CASH REQUIRED	$480,000
CASH BORROWED	170,000