Entries and Schedules for Unfinished Jobs and Completed Jobs
Hildreth Company uses a job order cost system. The following data summarize the operations related to production for April, the first month of operations:
Materials purchased on account, $2,700
Materials requisitioned and factory labor used:
Job No.MaterialsFactory Labor
101$2,660 $1,870
1023,250 2520
1032,150 1,230
1047,290 4,640
1054,630 3,530
1063,380 2,240
For general factory use900 2,770
Factory overhead costs incurred on account, $5,080.
Depreciation of machinery and equipment, $1,330.
The factory overhead rate is $70 per machine hour. Machine hours used:
Job No.Machine Hours
101 17
102 39
103 33
104 82
105 27
106 32
Total 230
Jobs completed: 101, 102, 103, and 105.
Jobs were shipped and customers were billed as follows: Job 101, $8,390; Job 102, $12,110; Job 105, $16,500.
Required:
1. Journalize the entries to record the summarized operations. If an amount box does not require an entry, leave it blank.
EntriesDescriptionDebitCredit
a.Materials
Accounts Payable
b.Work in Process
Factory Overhead
Materials
Wages Payable
c.Factory Overhead
Accounts Payable
d.Factory Overhead
Accumulated Depreciation-Machinery and Equipment
e.Work in Process
Factory Overhead
f.Finished Goods
Work in Process
g. SaleAccounts Receivable
Sales
g. CostCost of Goods Sold
Finished Goods
2. Post the appropriate entries to T accounts for Work in Process and Finished Goods, using the identifying letters as transaction codes. Insert memo account balances as of the end of the month.
Work in Process
(b) (f)
(e)
Bal.
Finished Goods
(f) (g)
Bal.
3. Prepare a schedule of unfinished jobs to support the balance in the work in process account.
Hildreth Company
Schedule of Unfinished Jobs
JobDirect MaterialsDirect LaborFactory OverheadTotal
No. 104 $$$$
No. 106
Balance of Work in Process, April 30$
4. Prepare a schedule of completed jobs on hand to support the balance in the finished goods account.
Hildreth Company
Schedule of Completed Jobs
JobDirect MaterialsDirect LaborFactory OverheadTotal
Finished Goods, April 30 (Job 103) $$$$
In: Accounting
Entries and Schedules for Unfinished Jobs and Completed Jobs
Hildreth Company uses a job order cost system. The following data summarize the operations related to production for April, the first month of operations:
Materials purchased on account, $2,920.
Materials requisitioned and factory labor used:
Job No.MaterialsFactory Labor
101$2,850 $2,940
1023,480 3,970
1032,310 1,940
1047,810 7,290
1054,960 5,560
1063,620 3,530
For general factory use970 4,350
Factory overhead costs incurred on account, $5,440.
Depreciation of machinery and equipment, $2,090.
The factory overhead rate is $60 per machine hour. Machine hours
used:
Job No.Machine Hours
101 20
102 44
103 35
104 78
105 23
106 38
Total 238
Jobs completed: 101, 102, 103, and 105.
Jobs were shipped and customers were billed as follows: Job 101, $8,390; Job 102, $12,110; Job 105, $18,420.
Required:
1. Journalize the entries to record the summarized operations. If an amount box does not require an entry, leave it blank.
EntriesDescriptionDebitCredit
a.Materials
Accounts Payable
b.Work in Process
Factory Overhead
Materials
Wages Payable
c.Factory Overhead
Accounts Payable
d.Factory Overhead
Accumulated Depreciation-Machinery and Equipment
e.Work in Process
Factory Overhead
f.Finished Goods
Work in Process
g. SaleAccounts Receivable
Sales
g. CostCost of Goods Sold
Finished Goods
2. Post the appropriate entries to T accounts for Work in Process and Finished Goods, using the identifying letters as transaction codes. Insert memo account balances as of the end of the month.
Work in Process
(b) (f)
(e)
Bal.
Finished Goods
(f) (g)
Bal.
3. Prepare a schedule of unfinished jobs to support the balance in the work in process account.
Hildreth Company
Schedule of Unfinished Jobs
JobDirect MaterialsDirect LaborFactory OverheadTotal
No. 104 $$$$
No. 106
Balance of Work in Process, April 30$
4. Prepare a schedule of completed jobs on hand to support the balance in the finished goods account.
Hildreth Company
Schedule of Completed Jobs
JobDirect MaterialsDirect LaborFactory OverheadTotal
Finished Goods, April 30 (Job 103) $$$$
In: Accounting
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below.
The company sells many styles of earrings, but all are sold for the same price—$20 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):
| January (actual) | 23,200 | June (budget) | 53,200 |
| February (actual) | 29,200 | July (budget) | 33,200 |
| March (actual) | 43,200 | August (budget) | 31,200 |
| April (budget) | 68,200 | September (budget) | 28,200 |
| May (budget) | 103,200 | ||
The concentration of sales before and during May is due to Mother’s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.
Suppliers are paid $5.60 for a pair of earrings. One-half of a month’s purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit. Only 20% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.
Monthly operating expenses for the company are given below:
| Variable: | |||
| Sales commissions | 4 | % of sales | |
| Fixed: | |||
| Advertising | $ | 360,000 | |
| Rent | $ | 34,000 | |
| Salaries | $ | 138,000 | |
| Utilities | $ | 15,000 | |
| Insurance | $ | 4,600 | |
| Depreciation | $ | 30,000 | |
Insurance is paid on an annual basis, in November of each year.
The company plans to purchase $24,000 in new equipment during May and $56,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $27,000 each quarter, payable in the first month of the following quarter.
The company’s balance sheet as of March 31 is given below:
| Assets | ||
| Cash | $ | 90,000 |
| Accounts receivable ($58,400 February sales; $691,200 March sales) | 749,600 | |
| Inventory | 152,768 | |
| Prepaid insurance | 29,000 | |
| Property and equipment (net) | 1,110,000 | |
| Total assets | $ | 2,131,368 |
| Liabilities and Stockholders’ Equity | ||
| Accounts payable | $ | 116,000 |
| Dividends payable | 27,000 | |
| Common stock | 1,120,000 | |
| Retained earnings | 868,368 | |
| Total liabilities and stockholders’ equity | $ | 2,131,368 |
The company maintains a minimum cash balance of $66,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.
The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $66,000 in cash.
3. A budgeted income statement for the three-month period ending June 30. Use the contribution approach.
In: Accounting
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below.
The company sells many styles of earrings, but all are sold for the same price—$20 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):
| January (actual) | 23,200 | June (budget) | 53,200 |
| February (actual) | 29,200 | July (budget) | 33,200 |
| March (actual) | 43,200 | August (budget) | 31,200 |
| April (budget) | 68,200 | September (budget) | 28,200 |
| May (budget) | 103,200 | ||
The concentration of sales before and during May is due to Mother’s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.
Suppliers are paid $5.60 for a pair of earrings. One-half of a month’s purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit. Only 20% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.
Monthly operating expenses for the company are given below:
| Variable: | |||
| Sales commissions | 4 | % of sales | |
| Fixed: | |||
| Advertising | $ | 360,000 | |
| Rent | $ | 34,000 | |
| Salaries | $ | 138,000 | |
| Utilities | $ | 15,000 | |
| Insurance | $ | 4,600 | |
| Depreciation | $ | 30,000 | |
Insurance is paid on an annual basis, in November of each year.
The company plans to purchase $24,000 in new equipment during May and $56,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $27,000 each quarter, payable in the first month of the following quarter.
The company’s balance sheet as of March 31 is given below:
| Assets | ||
| Cash | $ | 90,000 |
| Accounts receivable ($58,400 February sales; $691,200 March sales) | 749,600 | |
| Inventory | 152,768 | |
| Prepaid insurance | 29,000 | |
| Property and equipment (net) | 1,110,000 | |
| Total assets | $ | 2,131,368 |
| Liabilities and Stockholders’ Equity | ||
| Accounts payable | $ | 116,000 |
| Dividends payable | 27,000 | |
| Common stock | 1,120,000 | |
| Retained earnings | 868,368 | |
| Total liabilities and stockholders’ equity | $ | 2,131,368 |
The company maintains a minimum cash balance of $66,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.
The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $66,000 in cash.
Required:
Prepare a master budget for the three-month period ending June 30. Include the following detailed schedules:
4. A budgeted balance sheet as of June 30.
In: Accounting
Case 8-33 Master Budget with Supporting Schedules [LO8-2, LO8-4, LO8-8, LO8-9, LO8-10]
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below.
The company sells many styles of earrings, but all are sold for the same price—$15 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):
| January (actual) | 21,800 | June (budget) | 51,800 |
| February (actual) | 27,800 | July (budget) | 31,800 |
| March (actual) | 41,800 | August (budget) | 29,800 |
| April (budget) | 66,800 | September (budget) | 26,800 |
| May (budget) | 101,800 | ||
The concentration of sales before and during May is due to Mother’s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.
Suppliers are paid $4.90 for a pair of earrings. One-half of a month’s purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit. Only 20% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.
Monthly operating expenses for the company are given below:
| Variable: | |||
| Sales commissions | 4 | % of sales | |
| Fixed: | |||
| Advertising | $ | 290,000 | |
| Rent | $ | 27,000 | |
| Salaries | $ | 124,000 | |
| Utilities | $ | 11,500 | |
| Insurance | $ | 3,900 | |
| Depreciation | $ | 23,000 | |
Insurance is paid on an annual basis, in November of each year.
The company plans to purchase $20,500 in new equipment during May and $49,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $21,750 each quarter, payable in the first month of the following quarter.
The company’s balance sheet as of March 31 is given below:
| Assets | ||
| Cash | $ | 83,000 |
| Accounts receivable ($41,700 February sales; $501,600 March sales) | 543,300 | |
| Inventory | 130,928 | |
| Prepaid insurance | 25,500 | |
| Property and equipment (net) | 1,040,000 | |
| Total assets | $ | 1,822,728 |
| Liabilities and Stockholders’ Equity | ||
| Accounts payable | $ | 109,000 |
| Dividends payable | 21,750 | |
| Common stock | 980,000 | |
| Retained earnings | 711,978 | |
| Total liabilities and stockholders’ equity | $ | 1,822,728 |
The company maintains a minimum cash balance of $59,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.
The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $59,000 in cash.
Required:
4. A budgeted balance sheet as of June 30.
In: Accounting
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below.
The company sells many styles of earrings, but all are sold for the same price—$13 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):
| January (actual) | 20,600 | June (budget) | 50,600 |
| February (actual) | 26,600 | July (budget) | 30,600 |
| March (actual) | 40,600 | August (budget) | 28,600 |
| April (budget) | 65,600 | September (budget) | 25,600 |
| May (budget) | 100,600 | ||
The concentration of sales before and during May is due to Mother’s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.
Suppliers are paid $4.30 for a pair of earrings. One-half of a month’s purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit. Only 20% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.
Monthly operating expenses for the company are given below:
| Variable: | |||
| Sales commissions | 4 | % of sales | |
| Fixed: | |||
| Advertising | $ | 230,000 | |
| Rent | $ | 21,000 | |
| Salaries | $ | 112,000 | |
| Utilities | $ | 8,500 | |
| Insurance | $ | 3,300 | |
| Depreciation | $ | 17,000 | |
Insurance is paid on an annual basis, in November of each year.
The company plans to purchase $17,500 in new equipment during May and $43,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $17,250 each quarter, payable in the first month of the following quarter.
The company’s balance sheet as of March 31 is given below:
| Assets | ||
| Cash | $ | 77,000 |
| Accounts receivable ($34,580 February sales; $422,240 March sales) | 456,820 | |
| Inventory | 112,832 | |
| Prepaid insurance | 22,500 | |
| Property and equipment (net) | 980,000 | |
| Total assets | $ | 1,649,152 |
| Liabilities and Stockholders’ Equity | ||
| Accounts payable | $ | 103,000 |
| Dividends payable | 17,250 | |
| Common stock | 860,000 | |
| Retained earnings | 668,902 | |
| Total liabilities and stockholders’ equity | $ | 1,649,152 |
The company maintains a minimum cash balance of $53,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.
The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $53,000 in cash.
Required:
4. A budgeted balance sheet as of June 30.
In: Accounting
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below.
The company sells many styles of earrings, but all are sold for the same price—$13 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):
| January (actual) | 20,600 | June (budget) | 50,600 |
| February (actual) | 26,600 | July (budget) | 30,600 |
| March (actual) | 40,600 | August (budget) | 28,600 |
| April (budget) | 65,600 | September (budget) | 25,600 |
| May (budget) | 100,600 | ||
The concentration of sales before and during May is due to Mother’s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.
Suppliers are paid $4.30 for a pair of earrings. One-half of a month’s purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit. Only 20% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.
Monthly operating expenses for the company are given below:
| Variable: | |||
| Sales commissions | 4 | % of sales | |
| Fixed: | |||
| Advertising | $ | 230,000 | |
| Rent | $ | 21,000 | |
| Salaries | $ | 112,000 | |
| Utilities | $ | 8,500 | |
| Insurance | $ | 3,300 | |
| Depreciation | $ | 17,000 | |
Insurance is paid on an annual basis, in November of each year.
The company plans to purchase $17,500 in new equipment during May and $43,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $17,250 each quarter, payable in the first month of the following quarter.
The company’s balance sheet as of March 31 is given below:
| Assets | ||
| Cash | $ | 77,000 |
| Accounts receivable ($34,580 February sales; $422,240 March sales) | 456,820 | |
| Inventory | 112,832 | |
| Prepaid insurance | 22,500 | |
| Property and equipment (net) | 980,000 | |
| Total assets | $ | 1,649,152 |
| Liabilities and Stockholders’ Equity | ||
| Accounts payable | $ | 103,000 |
| Dividends payable | 17,250 | |
| Common stock | 860,000 | |
| Retained earnings | 668,902 | |
| Total liabilities and stockholders’ equity | $ | 1,649,152 |
The company maintains a minimum cash balance of $53,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.
The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $53,000 in cash.
3. A budgeted income statement for the three-month period ending June 30. Use the contribution approach.
4. A budgeted balance sheet as of June 30.
In: Accounting
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below.
The company sells many styles of earrings, but all are sold for the same price—$18 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):
| January (actual) | 23,800 | June (budget) | 53,800 |
| February (actual) | 29,800 | July (budget) | 33,800 |
| March (actual) | 43,800 | August (budget) | 31,800 |
| April (budget) | 68,800 | September (budget) | 28,800 |
| May (budget) | 103,800 | ||
The concentration of sales before and during May is due to Mother’s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.
Suppliers are paid $5.90 for a pair of earrings. One-half of a month’s purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit. Only 20% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.
Monthly operating expenses for the company are given below:
| Variable: | |||
| Sales commissions | 4 | % of sales | |
| Fixed: | |||
| Advertising | $ | 390,000 | |
| Rent | $ | 37,000 | |
| Salaries | $ | 144,000 | |
| Utilities | $ | 16,500 | |
| Insurance | $ | 4,900 | |
| Depreciation | $ | 33,000 | |
Insurance is paid on an annual basis, in November of each year.
The company plans to purchase $25,500 in new equipment during May and $59,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $29,250 each quarter, payable in the first month of the following quarter.
The company’s balance sheet as of March 31 is given below:
| Assets | ||
| Cash | $ | 93,000 |
| Accounts receivable ($53,640 February sales; $630,720 March sales) | 684,360 | |
| Inventory | 162,368 | |
| Prepaid insurance | 30,500 | |
| Property and equipment (net) | 1,140,000 | |
| Total assets | $ | 2,110,228 |
| Liabilities and Stockholders’ Equity | ||
| Accounts payable | $ | 119,000 |
| Dividends payable | 29,250 | |
| Common stock | 1,180,000 | |
| Retained earnings | 781,978 | |
| Total liabilities and stockholders’ equity | $ | 2,110,228 |
The company maintains a minimum cash balance of $69,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.
The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $69,000 in cash.
Required:
A budgeted balance sheet as of June 30.
In: Accounting
You have just been contracted as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash.
Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below.
The company sells many styles of earrings, but all are sold for the same price - $10 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow:
|
January (actual) |
20,000 |
|
February (actual) |
26,000 |
|
March (actual) |
40,000 |
|
April (budget) |
65,000 |
|
May (budget) |
100,000 |
|
June (budget) |
50,000 |
|
July (budget) |
30,000 |
|
August (budget) |
28,000 |
|
September (budget) |
25,000 |
The concentration of sales before and during May is due to Mother’s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the bracelets sold in the following month.
Suppliers are paid $4 for each bracelet. One-half of a month's purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit with no discounts. The company has found, however, that only 20% of a month's sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.
Monthly operating expenses for the company are given below:
Variable expenses:
Sales commissions 4% of sales
Fixed expenses:
Advertising $200,000
Rent $18,000
Salaries $106,000
Utilities $ 7,000
Insurance $3,000
Depreciation $14,000
Insurance is paid on an annual basis, in November of each year.
The company plans to purchase $16,000 in new equipment during May and $40,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $15,000 each quarter, payable in the first month of the following quarter.
Other relevant data is given below:
Cash balance as of September 30 $74,000
Inventory balance as of September 30 $112,000
Merchandise purchases for September $200,000
The company maintains a minimum cash balance of at least $50,000 at the end of each month. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.
The company has an agreement with a bank that allows the company to borrow the exact amount needed at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company will pay the bank all of the accrued interest on the loan and as much of the loan as possible while still retaining at least $50,000 in cash.
Required:
Prepare a cash budget for the three-month period ending June 30. Include the following detailed budgets:
1.A cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $50,000.
In: Accounting
In: Accounting