Reference no: EM132861653
Question 1 - Russell Company has the following projected account balances for June 30, 2011:
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Accounts payable
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$80,000
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Sales
|
$1,600,000
|
|
Accounts receivable
|
200,000
|
Capital stock
|
800,000
|
|
Depreciation, factory
|
48,000
|
Retained earnings
|
?
|
|
Inventories (5/31 & 6/30)
|
360,000
|
Cash
|
112,000
|
|
Direct materials used
|
400,000
|
Equipment, net
|
480,000
|
|
Office salaries
|
160,000
|
Buildings, net
|
800,000
|
|
Insurance, factory
|
8,000
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Utilities, factory
|
32,000
|
|
Plant wages
|
280,000
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Selling expenses
|
120,000
|
|
Bonds payable
|
320,000
|
Maintenance, factory
|
56,000
|
Required -
a. Prepare a budgeted income statement for June 2011.
b. Prepare a budgeted balance sheet as of June 30, 2011.
Question 2 - Dalton Company has budgeted sales revenues as follows:
|
|
June
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July
|
August
|
|
Credit sales
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$135,000
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$145,000
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$90,000
|
|
Cash sales
|
90,000
|
255,000
|
195,000
|
|
Total sales
|
$225,000
|
$400,000
|
$285,000
|
Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Budgeted inventory purchases are:
June $300,000
July 250,000
August 105,000
Other cash disbursements budgeted: (a) selling and administrative expenses of $48,000 each month, (b) dividends of $103,000 will be paid in July, and (c) purchase of equipment in August for $30,000 cash.
The company wishes to maintain a minimum cash balance of $50,000 at the end of each month. The company borrows money from the bank at 8% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $50,000. Assume that borrowed money in this case is for one month.
Required - Prepare a cash budget for the months of July and August. Prepare separate schedules for expected collections from customers and expected payments for purchases of inventory.