+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
Lambert Department Store is located in midtown Metropolis. During the past several years, net income has been declining because suburban shopping centers have been attractin
acc504 TLC- There is more to ABC costing that understanding how costs behave and applying more drivers. Robert Kaplan (http://www.hbs.edu/faculty/Pages/profile.aspx?facId=64
The standard costs and actual costs for direct materials, direct labor, and factory overhead for the manufacture of 2,500 units of product and find the labor efficiency (quan
Explain one difference in auditor's procedures when conducting a evaluation under SSARS vs. a review of interim financial information conducted under auditing standards.
Prepare a performance report for Westcott's manufacturing costs in 2008. A total of 10,000 units will be produced during the year. Calculate the budgeted unit manufacturing co
What is the change in annual operating income from discontinuing the talking dog product line and what level of annual sales of the talking dog (in units) should Brewer be in
What amount of interest expense is reported for 2009 and would the bond interest expense reported in 2009 would be reported if the straight-line method of amortization were
What is meant by the terms relevant and irrelevant costs and revenues in Strategic Management Accounting decision making? Include several small numerical examples in your an