Cash Budget
Friendly Freddie’s is an independently owned major appliance and electronics discount chain with seven stores located in a Midwestern metropolitan area. Rapid expansion has created the need for careful planning of cash requirements to ensure that the chain is able to replenish stock adequately and meet payment schedules to creditors. Fred Ferguson, founder of the chain, has established a banking relationship that provides a $200,000 line of credit to Friendly Freddie’s. The bank requires that a minimum balance of $8,220 be kept in the chain’s checking account at the end of each month. When the balance goes below $8,220, the bank automatically extends the line of credit in multiples of $1,000 so that the checking account balance is at least $8,220 at month-end.
Friendly Freddie’s attempts to borrow as little as possible and repays the loans quickly in multiples of $1,000 plus 2 percent monthly interest on the entire loan balance. Interest payments and any principal payments are paid at the end of the month following the loan. The chain currently has no outstanding loans.
The following cash receipts and disbursements data apply to the fourth quarter of the current calendar year.
| Estimated beginning cash balance | $ | 8,850 |
| Estimated cash sales: | ||
| October | 13,770 | |
| November | 29,420 | |
| December | 43,860 | |
| Sales on account: | ||
| July (actual) | 129,400 | |
| August (actual) | 104,000 | |
| September (actual) | 128,200 | |
| October (estimated) | 134,700 | |
| November (estimated) | 142,600 | |
| December (estimated) | 187,300 |
Projected cash collection of sales on account is estimated to be 71 percent in the month following the sale, 19 percent in the second month following the sale, and 8 percent in the third month following the sale. The 2 percent beyond the third month following the sale is determined to be uncollectible. In addition, the chain is scheduled to receive $12,700 cash on a note receivable in October.
All inventory purchases are made on account as the chain has excellent credit with all vendors because of a strong payment history. The following information regarding inventory purchases is available.
| Inventory Purchases | ||
| September (actual) | $ | 120,200 |
| October (estimated) | 112,200 | |
| November (estimated) | 128,400 | |
| December (estimated) | 94,800 | |
Cash disbursements for inventory are made in the month following purchase using an average cash discount of 3 percent for timely payment. Monthly cash disbursements for operating expenses during October, November, and December are estimated to be $37,900, $40,500, and $45,800, respectively.
Required:
Prepare Friendly Freddie’s cash budget for the months of October, November, and December showing all receipts, disbursements, and credit line activity, where applicable. (CMA adapted). Enter all cash disbursements as positive values. If a cash balance is negative, enter the amount as a negative value. If an amount is zero, enter "0".
| Friendly Freddie's | |||
| Cash Budget | |||
| October through December | |||
| October | November | December | |
| Beginning cash balance | $ | $ | $ |
| Receipts: | |||
| Cash sales | |||
| Collections of sales on account | |||
| Note receivable repayment | |||
| Total cash available | $ | $ | $ |
| Disbursements: | |||
| Payment of inventory purchases | $ | $ | $ |
| Operating expenses | |||
| Loan repayment | |||
| Interest | |||
| Total disbursements | $ | $ | $ |
| Cash balance | $ | $ | $ |
| Bank loan | |||
| Adjusted cash balance | $ | $ | $ |
Feedback
The Cash Budget is critical to managers’ planning. It shows how much cash will be available each time period. Companies without sufficient cash may not survive even if their net income is positive.
In: Accounting
Cash Budget
Friendly Freddie’s is an independently owned major appliance and electronics discount chain with seven stores located in a Midwestern metropolitan area. Rapid expansion has created the need for careful planning of cash requirements to ensure that the chain is able to replenish stock adequately and meet payment schedules to creditors. Fred Ferguson, founder of the chain, has established a banking relationship that provides a $200,000 line of credit to Friendly Freddie’s. The bank requires that a minimum balance of $8,210 be kept in the chain’s checking account at the end of each month. When the balance goes below $8,210, the bank automatically extends the line of credit in multiples of $1,000 so that the checking account balance is at least $8,210 at month-end.
Friendly Freddie’s attempts to borrow as little as possible and repays the loans quickly in multiples of $1,000 plus 2 percent monthly interest on the entire loan balance. Interest payments and any principal payments are paid at the end of the month following the loan. The chain currently has no outstanding loans.
The following cash receipts and disbursements data apply to the fourth quarter of the current calendar year.
| Estimated beginning cash balance | $ | 9,140 |
| Estimated cash sales: | ||
| October | 13,800 | |
| November | 29,250 | |
| December | 43,830 | |
| Sales on account: | ||
| July (actual) | 130,600 | |
| August (actual) | 103,200 | |
| September (actual) | 127,300 | |
| October (estimated) | 135,100 | |
| November (estimated) | 142,400 | |
| December (estimated) | 188,700 |
Projected cash collection of sales on account is estimated to be 71 percent in the month following the sale, 19 percent in the second month following the sale, and 6 percent in the third month following the sale. The 4 percent beyond the third month following the sale is determined to be uncollectible. In addition, the chain is scheduled to receive $12,800 cash on a note receivable in October.
All inventory purchases are made on account as the chain has excellent credit with all vendors because of a strong payment history. The following information regarding inventory purchases is available.
| Inventory Purchases | ||
| September (actual) | $ | 120,800 |
| October (estimated) | 111,500 | |
| November (estimated) | 127,600 | |
| December (estimated) | 94,400 | |
Cash disbursements for inventory are made in the month following purchase using an average cash discount of 3 percent for timely payment. Monthly cash disbursements for operating expenses during October, November, and December are estimated to be $38,500, $41,000, and $46,200, respectively.
Required:
Prepare Friendly Freddie’s cash budget for the months of October, November, and December showing all receipts, disbursements, and credit line activity, where applicable. (CMA adapted). Enter all cash disbursements as positive values. If a cash balance is negative, enter the amount as a negative value. If an amount is zero, enter "0".
| Friendly Freddie's | |||
| Cash Budget | |||
| October through December | |||
| October | November | December | |
| Beginning cash balance | $ | $ | $ |
| Receipts: | |||
| Cash sales | |||
| Collections of sales on account | |||
| Note receivable repayment | |||
| Total cash available | $ | $ | $ |
| Disbursements: | |||
| Payment of inventory purchases | $ | $ | $ |
| Operating expenses | |||
| Loan repayment | |||
| Interest | |||
| Total disbursements | $ | $ | $ |
| Cash balance | $ | $ | $ |
| Bank loan | |||
| Adjusted cash balance | $ | $ | $ |
In: Accounting
Pitman Company is a small editorial services company owned and operated by Jan Pitman. On October 31, 2019 the end of the current year, Pitman Company’s accounting clerk prepared the following unadjusted trial balance:
Pitman Company
UNADJUSTED TRIAL BALANCE
October 31, 2019
| ACCOUNT TITLE | DEBIT | CREDIT | |
|---|---|---|---|
|
1 |
Cash |
7,655.00 |
|
|
2 |
Accounts Receivable |
38,345.00 |
|
|
3 |
Prepaid Insurance |
7,075.00 |
|
|
4 |
Supplies |
2,290.00 |
|
|
5 |
Land |
113,500.00 |
|
|
6 |
Building |
149,450.00 |
|
|
7 |
Accumulated Depreciation-Building |
87,905.00 |
|
|
8 |
Equipment |
133,250.00 |
|
|
9 |
Accumulated Depreciation-Equipment |
96,435.00 |
|
|
10 |
Accounts Payable |
11,860.00 |
|
|
11 |
Unearned Rent |
6,705.00 |
|
|
12 |
Jan Pitman, Capital |
220,820.00 |
|
|
13 |
Jan Pitman, Drawing |
14,690.00 |
|
|
14 |
Fees Earned |
328,600.00 |
|
|
15 |
Salaries and Wages Expense |
198,220.00 |
|
|
16 |
Utilities Expense |
42,120.00 |
|
|
17 |
Advertising Expense |
22,315.00 |
|
|
18 |
Repairs Expense |
17,210.00 |
|
|
19 |
Miscellaneous Expense |
6,205.00 |
|
|
20 |
Totals |
752,325.00 |
752,325.00 |
The data needed to determine year-end adjustments are as follows:
| a. | Unexpired insurance at October 31, $5,860. |
| b. | Supplies on hand at October 31, $545. |
| c. | Depreciation of building for the year, $7,985. |
| d. | Depreciation of equipment for the year, $4,080. |
| e. | Unearned rent at October 31, $1,145. |
| f. | Accrued salaries and wages at October 31, $3,490. |
| g. | Fees earned but unbilled on October 31, $11,640. |
| Required: | |
| 1. | Journalize the adjusting entries using the following additional accounts: Salaries and Wages Payable, Rent Revenue, Insurance Expense, Depreciation Expense—Building, Depreciation Expense—Equipment and Supplies Expense. Refer to the Chart of Accounts for exact wording of account titles. |
| 2. | Determine the balances of the accounts affected by the adjusting entries and prepare an adjusted trial balance. |
PAGE 10
JOURNAL
ACCOUNTING EQUATION
Score: 130/176
| DATE | DESCRIPTION | POST. REF. | DEBIT | CREDIT | ASSETS | LIABILITIES | EQUITY | |
|---|---|---|---|---|---|---|---|---|
|
1 |
Adjusting Entries |
|||||||
|
2 |
✔ |
✔ |
||||||
|
3 |
✔ |
|||||||
|
4 |
✔ |
✔ |
||||||
|
5 |
✔ |
|||||||
|
6 |
✔ |
|||||||
|
7 |
✔ |
|||||||
|
8 |
✔ |
|||||||
|
9 |
||||||||
|
10 |
✔ |
✔ |
||||||
|
11 |
✔ |
|||||||
|
12 |
✔ |
✔ |
||||||
|
13 |
✔ |
|||||||
|
14 |
✔ |
✔ |
||||||
|
15 |
✔ |
2. Determine the balances of the accounts affected by the adjusting entries and prepare an adjusted trial balance.
Question not attempted.
Pitman Company
ADJUSTED TRIAL BALANCE
Score: 0/103
October 31, 2019
| ACCOUNT TITLE | DEBIT | CREDIT | |
|---|---|---|---|
|
1 |
Cash |
||
|
2 |
Accounts Receivable |
||
|
3 |
Prepaid Insurance |
||
|
4 |
Supplies |
||
|
5 |
Land |
||
|
6 |
Building |
||
|
7 |
Accumulated Depreciation-Building |
||
|
8 |
Equipment |
||
|
9 |
Accumulated Depreciation-Equipment |
||
|
10 |
Accounts Payable |
||
|
11 |
Unearned Rent |
||
|
12 |
Salaries and Wages Payable |
||
|
13 |
Jan Pitman, Capital |
||
|
14 |
Jan Pitman, Drawing |
||
|
15 |
Fees Earned |
||
|
16 |
Rent Revenue |
||
|
17 |
Salaries and Wages Expense |
||
|
18 |
Utilities Expense |
||
|
19 |
Advertising Expense |
||
|
20 |
Repairs Expense |
||
|
21 |
Depreciation Expense-Building |
||
|
22 |
Depreciation Expense-Equipment |
||
|
23 |
Insurance Expense |
||
|
24 |
Supplies Expense |
||
|
25 |
Miscellaneous Expense |
||
|
26 |
Totals |
In: Accounting
Cash Budget
Friendly Freddie’s is an independently owned major appliance and electronics discount chain with seven stores located in a Midwestern metropolitan area. Rapid expansion has created the need for careful planning of cash requirements to ensure that the chain is able to replenish stock adequately and meet payment schedules to creditors. Fred Ferguson, founder of the chain, has established a banking relationship that provides a $200,000 line of credit to Friendly Freddie’s. The bank requires that a minimum balance of $8,240 be kept in the chain’s checking account at the end of each month. When the balance goes below $8,240, the bank automatically extends the line of credit in multiples of $1,000 so that the checking account balance is at least $8,240 at month-end.
Friendly Freddie’s attempts to borrow as little as possible and repays the loans quickly in multiples of $1,000 plus 2 percent monthly interest on the entire loan balance. Interest payments and any principal payments are paid at the end of the month following the loan. The chain currently has no outstanding loans.
The following cash receipts and disbursements data apply to the fourth quarter of the current calendar year.
| Estimated beginning cash balance | $ | 9,040 |
| Estimated cash sales: | ||
| October | 13,880 | |
| November | 29,130 | |
| December | 44,400 | |
| Sales on account: | ||
| July (actual) | 130,500 | |
| August (actual) | 104,500 | |
| September (actual) | 128,500 | |
| October (estimated) | 134,600 | |
| November (estimated) | 141,500 | |
| December (estimated) | 188,800 |
Projected cash collection of sales on account is estimated to be 69 percent in the month following the sale, 21 percent in the second month following the sale, and 6 percent in the third month following the sale. The 4 percent beyond the third month following the sale is determined to be uncollectible. In addition, the chain is scheduled to receive $13,500 cash on a note receivable in October.
All inventory purchases are made on account as the chain has excellent credit with all vendors because of a strong payment history. The following information regarding inventory purchases is available.
| Inventory Purchases | ||
| September (actual) | $ | 120,900 |
| October (estimated) | 112,500 | |
| November (estimated) | 127,600 | |
| December (estimated) | 95,200 | |
Cash disbursements for inventory are made in the month following purchase using an average cash discount of 3 percent for timely payment. Monthly cash disbursements for operating expenses during October, November, and December are estimated to be $38,000, $40,500, and $45,800, respectively.
Required:
Prepare Friendly Freddie’s cash budget for the months of October, November, and December showing all receipts, disbursements, and credit line activity, where applicable. (CMA adapted). Enter all cash disbursements as positive values. If a cash balance is negative, enter the amount as a negative value. If an amount is zero, enter "0".
| Friendly Freddie's | |||
| Cash Budget | |||
| October through December | |||
| October | November | December | |
| Beginning cash balance | $ | $ | $ |
| Receipts: | |||
| Cash sales | |||
| Collections of sales on account | |||
| Note receivable repayment | |||
| Total cash available | $ | $ | $ |
| Disbursements: | |||
| Payment of inventory purchases | $ | $ | $ |
| Operating expenses | |||
| Loan repayment | |||
| Interest | |||
| Total disbursements | $ | $ | $ |
| Cash balance | $ | $ | $ |
| Bank loan | |||
| Adjusted cash balance | $ | $ | $ |
In: Accounting
Cash Budget
Friendly Freddie’s is an independently owned major appliance and electronics discount chain with seven stores located in a Midwestern metropolitan area. Rapid expansion has created the need for careful planning of cash requirements to ensure that the chain is able to replenish stock adequately and meet payment schedules to creditors. Fred Ferguson, founder of the chain, has established a banking relationship that provides a $200,000 line of credit to Friendly Freddie’s. The bank requires that a minimum balance of $8,180 be kept in the chain’s checking account at the end of each month. When the balance goes below $8,180, the bank automatically extends the line of credit in multiples of $1,000 so that the checking account balance is at least $8,180 at month-end.
Friendly Freddie’s attempts to borrow as little as possible and repays the loans quickly in multiples of $1,000 plus 2 percent monthly interest on the entire loan balance. Interest payments and any principal payments are paid at the end of the month following the loan. The chain currently has no outstanding loans.
The following cash receipts and disbursements data apply to the fourth quarter of the current calendar year.
| Estimated beginning cash balance | $ | 9,100 |
| Estimated cash sales: | ||
| October | 13,580 | |
| November | 29,390 | |
| December | 44,090 | |
| Sales on account: | ||
| July (actual) | 129,300 | |
| August (actual) | 104,700 | |
| September (actual) | 127,200 | |
| October (estimated) | 134,000 | |
| November (estimated) | 141,300 | |
| December (estimated) | 187,200 |
Projected cash collection of sales on account is estimated to be 70 percent in the month following the sale, 20 percent in the second month following the sale, and 7 percent in the third month following the sale. The 3 percent beyond the third month following the sale is determined to be uncollectible. In addition, the chain is scheduled to receive $13,000 cash on a note receivable in October.
All inventory purchases are made on account as the chain has excellent credit with all vendors because of a strong payment history. The following information regarding inventory purchases is available.
| Inventory Purchases | ||
| September (actual) | $ | 120,700 |
| October (estimated) | 112,300 | |
| November (estimated) | 128,200 | |
| December (estimated) | 94,800 | |
Cash disbursements for inventory are made in the month following purchase using an average cash discount of 3 percent for timely payment. Monthly cash disbursements for operating expenses during October, November, and December are estimated to be $37,500, $41,300, and $45,500, respectively.
Required:
Prepare Friendly Freddie’s cash budget for the months of October, November, and December showing all receipts, disbursements, and credit line activity, where applicable. (CMA adapted). Enter all cash disbursements as positive values. If a cash balance is negative, enter the amount as a negative value. If an amount is zero, enter "0".
| Friendly Freddie's | |||
| Cash Budget | |||
| October through December | |||
| October | November | December | |
| Beginning cash balance | $ | $ | $ |
| Receipts: | |||
| Cash sales | |||
| Collections of sales on account | |||
| Note receivable repayment | |||
| Total cash available | $ | $ | $ |
| Disbursements: | |||
| Payment of inventory purchases | $ | $ | $ |
| Operating expenses | |||
| Loan repayment | |||
| Interest | |||
| Total disbursements | $ | $ | $ |
| Cash balance | $ | $ | $ |
| Bank loan | |||
| Adjusted cash balance | $ | $ | $ |
In: Accounting
Cash Budget
Friendly Freddie’s is an independently owned major appliance and electronics discount chain with seven stores located in a Midwestern metropolitan area. Rapid expansion has created the need for careful planning of cash requirements to ensure that the chain is able to replenish stock adequately and meet payment schedules to creditors. Fred Ferguson, founder of the chain, has established a banking relationship that provides a $200,000 line of credit to Friendly Freddie’s. The bank requires that a minimum balance of $8,180 be kept in the chain’s checking account at the end of each month. When the balance goes below $8,180, the bank automatically extends the line of credit in multiples of $1,000 so that the checking account balance is at least $8,180 at month-end.
Friendly Freddie’s attempts to borrow as little as possible and repays the loans quickly in multiples of $1,000 plus 2 percent monthly interest on the entire loan balance. Interest payments and any principal payments are paid at the end of the month following the loan. The chain currently has no outstanding loans.
The following cash receipts and disbursements data apply to the fourth quarter of the current calendar year.
| Estimated beginning cash balance | $ | 8,830 |
| Estimated cash sales: | ||
| October | 13,590 | |
| November | 29,440 | |
| December | 43,610 | |
| Sales on account: | ||
| July (actual) | 130,500 | |
| August (actual) | 104,800 | |
| September (actual) | 127,600 | |
| October (estimated) | 134,100 | |
| November (estimated) | 142,000 | |
| December (estimated) | 187,700 |
Projected cash collection of sales on account is estimated to be 70 percent in the month following the sale, 20 percent in the second month following the sale, and 7 percent in the third month following the sale. The 3 percent beyond the third month following the sale is determined to be uncollectible. In addition, the chain is scheduled to receive $12,900 cash on a note receivable in October.
All inventory purchases are made on account as the chain has excellent credit with all vendors because of a strong payment history. The following information regarding inventory purchases is available.
| Inventory Purchases | ||
| September (actual) | $ | 120,900 |
| October (estimated) | 111,900 | |
| November (estimated) | 128,400 | |
| December (estimated) | 96,000 | |
Cash disbursements for inventory are made in the month following purchase using an average cash discount of 3 percent for timely payment. Monthly cash disbursements for operating expenses during October, November, and December are estimated to be $37,900, $41,500, and $46,100, respectively.
Required:
Prepare Friendly Freddie’s cash budget for the months of October, November, and December showing all receipts, disbursements, and credit line activity, where applicable. (CMA adapted). Enter all cash disbursements as positive values. If a cash balance is negative, enter the amount as a negative value. If an amount is zero, enter "0".
| Friendly Freddie's | |||
| Cash Budget | |||
| October through December | |||
| October | November | December | |
| Beginning cash balance | $ | $ | $ |
| Receipts: | |||
| Cash sales | |||
| Collections of sales on account | |||
| Note receivable repayment | |||
| Total cash available | $ | $ | $ |
| Disbursements: | |||
| Payment of inventory purchases | $ | $ | $ |
| Operating expenses | |||
| Loan repayment | |||
| Interest | |||
| Total disbursements | $ | $ | $ |
| Cash balance | $ | $ | $ |
| Bank loan | |||
| Adjusted cash balance | $ | $ | $ |
In: Accounting
Cash Budget
Friendly Freddie’s is an independently owned major appliance and electronics discount chain with seven stores located in a Midwestern metropolitan area. Rapid expansion has created the need for careful planning of cash requirements to ensure that the chain is able to replenish stock adequately and meet payment schedules to creditors. Fred Ferguson, founder of the chain, has established a banking relationship that provides a $200,000 line of credit to Friendly Freddie’s. The bank requires that a minimum balance of $8,120 be kept in the chain’s checking account at the end of each month. When the balance goes below $8,120, the bank automatically extends the line of credit in multiples of $1,000 so that the checking account balance is at least $8,120 at month-end.
Friendly Freddie’s attempts to borrow as little as possible and repays the loans quickly in multiples of $1,000 plus 2 percent monthly interest on the entire loan balance. Interest payments and any principal payments are paid at the end of the month following the loan. The chain currently has no outstanding loans.
The following cash receipts and disbursements data apply to the fourth quarter of the current calendar year.
| Estimated beginning cash balance | $ | 8,870 |
| Estimated cash sales: | ||
| October | 13,530 | |
| November | 29,380 | |
| December | 43,860 | |
| Sales on account: | ||
| July (actual) | 129,700 | |
| August (actual) | 103,800 | |
| September (actual) | 128,200 | |
| October (estimated) | 135,500 | |
| November (estimated) | 142,300 | |
| December (estimated) | 187,900 |
Projected cash collection of sales on account is estimated to be 69 percent in the month following the sale, 21 percent in the second month following the sale, and 8 percent in the third month following the sale. The 2 percent beyond the third month following the sale is determined to be uncollectible. In addition, the chain is scheduled to receive $13,400 cash on a note receivable in October.
All inventory purchases are made on account as the chain has excellent credit with all vendors because of a strong payment history. The following information regarding inventory purchases is available.
| Inventory Purchases | ||
| September (actual) | $ | 120,900 |
| October (estimated) | 112,200 | |
| November (estimated) | 127,600 | |
| December (estimated) | 94,400 | |
Cash disbursements for inventory are made in the month following purchase using an average cash discount of 3 percent for timely payment. Monthly cash disbursements for operating expenses during October, November, and December are estimated to be $38,500, $41,300, and $45,800, respectively.
Required:
Prepare Friendly Freddie’s cash budget for the months of October, November, and December showing all receipts, disbursements, and credit line activity, where applicable. (CMA adapted). Enter all cash disbursements as positive values. If a cash balance is negative, enter the amount as a negative value. If an amount is zero, enter "0".
| Friendly Freddie's | |||
| Cash Budget | |||
| October through December | |||
| October | November | December | |
| Beginning cash balance | $ | $ | $ |
| Receipts: | |||
| Cash sales | |||
| Collections of sales on account | |||
| Note receivable repayment | |||
| Total cash available | $ | $ | $ |
| Disbursements: | |||
| Payment of inventory purchases | $ | $ | $ |
| Operating expenses | |||
| Loan repayment | |||
| Interest | |||
| Total disbursements | $ | $ | $ |
| Cash balance | $ | $ | $ |
| Bank loan | |||
| Adjusted cash balance | $ | $ | $ |
In: Accounting
Cash Budget
Friendly Freddie’s is an independently owned major appliance and electronics discount chain with seven stores located in a Midwestern metropolitan area. Rapid expansion has created the need for careful planning of cash requirements to ensure that the chain is able to replenish stock adequately and meet payment schedules to creditors. Fred Ferguson, founder of the chain, has established a banking relationship that provides a $200,000 line of credit to Friendly Freddie’s. The bank requires that a minimum balance of $8,100 be kept in the chain’s checking account at the end of each month. When the balance goes below $8,100, the bank automatically extends the line of credit in multiples of $1,000 so that the checking account balance is at least $8,100 at month-end.
Friendly Freddie’s attempts to borrow as little as possible and repays the loans quickly in multiples of $1,000 plus 2 percent monthly interest on the entire loan balance. Interest payments and any principal payments are paid at the end of the month following the loan. The chain currently has no outstanding loans.
The following cash receipts and disbursements data apply to the fourth quarter of the current calendar year.
| Estimated beginning cash balance | $ | 8,810 |
| Estimated cash sales: | ||
| October | 13,750 | |
| November | 29,010 | |
| December | 44,210 | |
| Sales on account: | ||
| July (actual) | 130,200 | |
| August (actual) | 103,500 | |
| September (actual) | 128,800 | |
| October (estimated) | 134,300 | |
| November (estimated) | 141,100 | |
| December (estimated) | 188,700 |
Projected cash collection of sales on account is estimated to be 68 percent in the month following the sale, 22 percent in the second month following the sale, and 7 percent in the third month following the sale. The 3 percent beyond the third month following the sale is determined to be uncollectible. In addition, the chain is scheduled to receive $13,500 cash on a note receivable in October.
All inventory purchases are made on account as the chain has excellent credit with all vendors because of a strong payment history. The following information regarding inventory purchases is available.
| Inventory Purchases | ||
| September (actual) | $ | 120,200 |
| October (estimated) | 111,600 | |
| November (estimated) | 128,100 | |
| December (estimated) | 95,400 | |
Cash disbursements for inventory are made in the month following purchase using an average cash discount of 3 percent for timely payment. Monthly cash disbursements for operating expenses during October, November, and December are estimated to be $37,900, $40,700, and $46,200, respectively.
Required:
Prepare Friendly Freddie’s cash budget for the months of October, November, and December showing all receipts, disbursements, and credit line activity, where applicable. (CMA adapted). Enter all cash disbursements as positive values. If a cash balance is negative, enter the amount as a negative value. If an amount is zero, enter "0".
| Friendly Freddie's | |||
| Cash Budget | |||
| October through December | |||
| October | November | December | |
| Beginning cash balance | $ | $ | $ |
| Receipts: | |||
| Cash sales | |||
| Collections of sales on account | |||
| Note receivable repayment | |||
| Total cash available | $ | $ | $ |
| Disbursements: | |||
| Payment of inventory purchases | $ | $ | $ |
| Operating expenses | |||
| Loan repayment | |||
| Interest | |||
| Total disbursements | $ | $ | $ |
| Cash balance | $ | $ | $ |
| Bank loan | |||
| Adjusted cash balance | $ | $ | $ |
In: Accounting
Cash Budget
Friendly Freddie’s is an independently owned major appliance and electronics discount chain with seven stores located in a Midwestern metropolitan area. Rapid expansion has created the need for careful planning of cash requirements to ensure that the chain is able to replenish stock adequately and meet payment schedules to creditors. Fred Ferguson, founder of the chain, has established a banking relationship that provides a $200,000 line of credit to Friendly Freddie’s. The bank requires that a minimum balance of $8,120 be kept in the chain’s checking account at the end of each month. When the balance goes below $8,120, the bank automatically extends the line of credit in multiples of $1,000 so that the checking account balance is at least $8,120 at month-end.
Friendly Freddie’s attempts to borrow as little as possible and repays the loans quickly in multiples of $1,000 plus 2 percent monthly interest on the entire loan balance. Interest payments and any principal payments are paid at the end of the month following the loan. The chain currently has no outstanding loans.
The following cash receipts and disbursements data apply to the fourth quarter of the current calendar year.
| Estimated beginning cash balance | $ | 8,850 |
| Estimated cash sales: | ||
| October | 13,930 | |
| November | 29,410 | |
| December | 43,580 | |
| Sales on account: | ||
| July (actual) | 130,300 | |
| August (actual) | 104,200 | |
| September (actual) | 127,500 | |
| October (estimated) | 135,000 | |
| November (estimated) | 141,100 | |
| December (estimated) | 187,900 |
Projected cash collection of sales on account is estimated to be 72 percent in the month following the sale, 18 percent in the second month following the sale, and 7 percent in the third month following the sale. The 3 percent beyond the third month following the sale is determined to be uncollectible. In addition, the chain is scheduled to receive $13,200 cash on a note receivable in October.
All inventory purchases are made on account as the chain has excellent credit with all vendors because of a strong payment history. The following information regarding inventory purchases is available.
| Inventory Purchases | ||
| September (actual) | $ | 120,900 |
| October (estimated) | 112,400 | |
| November (estimated) | 128,300 | |
| December (estimated) | 94,100 | |
Cash disbursements for inventory are made in the month following purchase using an average cash discount of 3 percent for timely payment. Monthly cash disbursements for operating expenses during October, November, and December are estimated to be $37,500, $40,600, and $46,100, respectively.
Required:
Prepare Friendly Freddie’s cash budget for the months of October, November, and December showing all receipts, disbursements, and credit line activity, where applicable. (CMA adapted). Enter all cash disbursements as positive values. If a cash balance is negative, enter the amount as a negative value. If an amount is zero, enter "0".
| Friendly Freddie's | |||
| Cash Budget | |||
| October through December | |||
| October | November | December | |
| Beginning cash balance | $ | $ | $ |
| Receipts: | |||
| Cash sales | |||
| Collections of sales on account | |||
| Note receivable repayment | |||
| Total cash available | $ | $ | $ |
| Disbursements: | |||
| Payment of inventory purchases | $ | $ | $ |
| Operating expenses | |||
| Loan repayment | |||
| Interest | |||
| Total disbursements | $ | $ | $ |
| Cash balance | $ | $ | $ |
| Bank loan | |||
| Adjusted cash balance | $ | $ | $ |
In: Accounting
Cash Budget
Friendly Freddie’s is an independently owned major appliance and electronics discount chain with seven stores located in a Midwestern metropolitan area. Rapid expansion has created the need for careful planning of cash requirements to ensure that the chain is able to replenish stock adequately and meet payment schedules to creditors. Fred Ferguson, founder of the chain, has established a banking relationship that provides a $200,000 line of credit to Friendly Freddie’s. The bank requires that a minimum balance of $8,260 be kept in the chain’s checking account at the end of each month. When the balance goes below $8,260, the bank automatically extends the line of credit in multiples of $1,000 so that the checking account balance is at least $8,260 at month-end.
Friendly Freddie’s attempts to borrow as little as possible and repays the loans quickly in multiples of $1,000 plus 2 percent monthly interest on the entire loan balance. Interest payments and any principal payments are paid at the end of the month following the loan. The chain currently has no outstanding loans.
The following cash receipts and disbursements data apply to the fourth quarter of the current calendar year.
| Estimated beginning cash balance | $ | 9,080 |
| Estimated cash sales: | ||
| October | 13,570 | |
| November | 29,170 | |
| December | 43,920 | |
| Sales on account: | ||
| July (actual) | 129,100 | |
| August (actual) | 103,000 | |
| September (actual) | 128,900 | |
| October (estimated) | 135,700 | |
| November (estimated) | 143,000 | |
| December (estimated) | 188,300 |
Projected cash collection of sales on account is estimated to be 71 percent in the month following the sale, 19 percent in the second month following the sale, and 6 percent in the third month following the sale. The 4 percent beyond the third month following the sale is determined to be uncollectible. In addition, the chain is scheduled to receive $13,400 cash on a note receivable in October.
All inventory purchases are made on account as the chain has excellent credit with all vendors because of a strong payment history. The following information regarding inventory purchases is available.
| Inventory Purchases | ||
| September (actual) | $ | 120,000 |
| October (estimated) | 112,000 | |
| November (estimated) | 127,600 | |
| December (estimated) | 95,800 | |
Cash disbursements for inventory are made in the month following purchase using an average cash discount of 3 percent for timely payment. Monthly cash disbursements for operating expenses during October, November, and December are estimated to be $37,900, $40,600, and $45,600, respectively.
Required:
Prepare Friendly Freddie’s cash budget for the months of October, November, and December showing all receipts, disbursements, and credit line activity, where applicable. (CMA adapted). Enter all cash disbursements as positive values. If a cash balance is negative, enter the amount as a negative value. If an amount is zero, enter "0".
| Friendly Freddie's | |||
| Cash Budget | |||
| October through December | |||
| October | November | December | |
| Beginning cash balance | $ | $ | $ |
| Receipts: | |||
| Cash sales | |||
| Collections of sales on account | |||
| Note receivable repayment | |||
| Total cash available | $ | $ | $ |
| Disbursements: | |||
| Payment of inventory purchases | $ | $ | $ |
| Operating expenses | |||
| Loan repayment | |||
| Interest | |||
| Total disbursements | $ | $ | $ |
| Cash balance | $ | $ | $ |
| Bank loan | |||
| Adjusted cash balance | $ | $ | $ |
In: Accounting