+1-415-670-9189
info@expertsmind.com
Prepare a cash budget for carmel covering
Course:- Cost Accounting
Reference No.:- EM13298401




Assignment Help
Assignment Help >> Cost Accounting

The Carmel Corporation's projected sales for the firsteight months of 2004 are as follows:

January $100,000

February 110,000
March 130,000
April 250,000
May $275,000
June 250,000
July 235,000
August 160,000

Of Carmel's sales, 20 percent is for cash, another 60percent is collected in the month following sale, and 20 percent iscollected in the second month following sale. November and Decembersales for 2003 were $220,000 and $175,000, respectively.

Carmel purchases its raw materials two months in advance of itssales equal to 70 percent of their final sales price. The supplieris paid one month after it makes delivery. For example, purchasesfor April sales are made in February and payment is made inMarch.

In addition, Carmel pays $10,000 per month for rent and $20,000each month for other expenditures. Tax prepayments for $23,000 aremade each quarter beginning in March.

The company's cash balance at December 31, 2003, was$22,000; a minimum balance of $20,000 must be maintained at alltimes. Assume that any short-term financing needed to maintain cashbalance would be paid off in the month following the month offinancing if sufficient funds are available. Interest on short-termloans (12 percent) is paid monthly. Borrowing to meet estimatedmonthly cash needs takes place at the beginning of the month. Thus,if in the month of April the firm expects to have a need foran additional $60,500, these funds would be borrowed at thebeginning of April with interest of $605 (.12 × 1/12 ×$60,500) owed for April and paid at the beginning of May.

a) Prepare a cash budget for Carmel covering the first seven months of 2004.

b) Carmel has $250,000 in notes payable due in July that must berepaid or renegotiated for an extension. Will the firm have ample cash to repay the notes?




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Cost Accounting) Materials
How many calendars did agents take to give to clients during January? What is the cost of the calendars given out? What is the cost of the ending inventory of calendars
How would the selling price of the bond be determined and specify how all items related to the bonds would be presented in a balance sheet prepared immediately after the bond
Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be 1.5% of credit sales and prepare the adjusting entry to record Bad Debts
Did this company mention a transfer pricing methodology in its disclosures? If yes, have they negotiated an advanced pricing agreement with the IRS with respect to transfer
Management accountants usually plan for a small positive cash balance in their cash budgets for all of the following reasons except and Labor efficiency has sometimes been in
What issues should be addressed to determine how the charge should be handled properly? How can this situation be prevented? If appropriate, include ethical issues in your r
Reduce rounding error, carry out all computations to at least three decimal places - the cost per equivalent unit for materials for the month in the first processing departme
Compute the cost per processed check for September at ROC - Big City Bank processes the checks its customers write at Riverdale Operations Center (ROC). ROC processed 2,800,0