Company sales budget for the second quarter

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Reference no: EM13858898

Problem 1: Silver Company makes a product that is very popular as a Mother's Day gift. Thus, peak sales occur in May of each year, as shown in the company's sales budget for the second quarter given below:

April May June Total

Budgeted sales (all on account) $310,000 $510,000 $160,000 $980,000

From past experience, the company has learned that 25% of a month's sales are collected in the month of sale, another 60% are collected in the month following sale, and the remaining 15% are collected in the second month following sale. Bad debts are negligible and can be  ignored. February sales totaled $240,000, and March sales totaled $270,000.

1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

2. Assume that the company will prepare a budgeted balance sheet as of June 30. Compute the accounts receivable as of that date.

Problem 2: Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows:

Sales in Units
April 64,000
May 80,000
June 104,000
July 87,000

The company is now in the process of preparing a production budget for the second quarter. Past experience has shown that end-of-month inventory levels must equal 15% of the following month's sales. The inventory at the end of March was 9,600 units.


Prepare a production budget for the second quarter; in your budget, show the number of units to be produced each month and for the quarter in total.

Problem 3: Four grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $1.80 per gram. Budgeted production of Mink Caress is given below by quarters for Year and for the first quarter of Year 3:

Year 2 Year 3

First Second Third Fourth First
Budgeted production, in bottles 94,000 124,000 184,000 134,000 104,000

Musk oil has become so popular as a perfume ingredient that it has become necessary to carry largeinventories as a precaution against stock-outs. For this reason, the inventory of musk oil at the end of a quarter must be equal to 20% of the following quarter's production needs. Some 75,200 grams of musk oil will be on hand to start the first quarter of Year 2.


Prepare a direct materials budget for musk oil, by quarter and in total, for Year 2.

Problem 4: Minden Company is a wholesale distributor of premium European chocolates. The company's balance sheet as of April 30 is given below:

Minden Company
Balance Sheet
April 30
Cash $ 11,400
Accounts receivable 75,000
Inventory 41,000
Buildings and equipment, net of depreciation 224,000
Total assets $ 351,400
Liabilities and Stockholders' Equity
Accounts payable $ 70,000
Note payable 15,500
Common stock 180,000
Retained earnings 85,900
Total liabilities and stockholders' equity $ 351,400

The company is in the process of preparing a budget for May and has assembled the following data:

a. Sales are budgeted at $220,000 for May. Of these sales, $66,000 will be for cash; the remainder will be credit sales. One-half of a month's credit sales are collected in the month the sales are made, and the remainder is collected in the following month. All of the April 30 accounts receivable will be collected in May.

b. Purchases of inventory are expected to total $128,000 during May. These purchases will all be on account. Forty percent of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the April 30 accounts payable to suppliers will be paid during May.

c. The May 31 inventory balance is budgeted at $56,000.

d. Selling and administrative expenses for May are budgeted at $86,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $6,750 for the month.

e. The note payable on the April 30 balance sheet will be paid during May, with $565 in interest. (All of the interest relates to May.)

f. New refrigerating equipment costing $6,700 will be purchased for cash during May.

g. During May, the company will borrow $25,300 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.


1-a. Prepare a schedule of expected cash collections from sales and a schedule of expected cash disbursements for merchandise purchases.

1-b. Prepare a cash budget for May.

2. Prepare a budgeted income statement for May

3. Prepare a budgeted balance sheet as of May 31

Problem 5: You have been asked to prepare a December cash budget for Ashton Company, a distributor of exercise equipment. The following information is available about the company's operations:

a. The cash balance on December 1 is $53,400.

b. Actual sales for October and November and expected sales for December are as follows:

October November December
Cash sales $ 77,000 $ 81,200 $ 87,800
Sales on account 435,000 538,000 644,000
Sales on account are collected over a three-month period as follows: 20% collected in the month of sale, 60% collected in the month following sale, and 18% collected in the second month following sale. The remaining 2% is uncollectible.

c. Purchases of inventory will total $341,000 for December. Thirty percent of a month's inventory purchases are paid during the month of purchase. The accounts payable remaining from November's inventory purchases total $165,000, all of which will be paid in December.

d. Selling and administrative expenses are budgeted at $516,000 for December. Of this amount, $94,900 is for depreciation.

e. A new web server for the Marketing Department costing $121,500 will be purchased for cash during December, and dividends totaling $13,000 will be paid during the month.

f. The company maintains a minimum cash balance of $20,000. An open line of credit is available from the company's bank to bolster the cash position as needed.


1. Prepare a schedule of expected cash collections for December

Reference no: EM13858898

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