Preparing the financial budget—cash budget
Use the original schedule of cash receipts completed in Exercise E22-26, Requirement 1, and the schedule of cash payments completed in Exercise E22-27 to complete a cash budget for Marcel Company for January, February, and March.
Additional information: Marcel’s beginning cash balance is $5,000, and Marcel desires to maintain a minimum ending cash balance of $5,000. Marcel borrows cash as needed at the beginning of each month in increments of $1,000 and repays the amounts borrowed in increments of $1,000 at the beginning of months when excess cash is available. The interest rate on amounts borrowed is 8% per year. Interest is paid at the beginning of the month on the outstanding balance from the previous month.
The balances in prepaid property taxes, accounts payable, and utilities payable are $3,330, $4,800, $900.
Beginning cash balance
Direct labor cost
Utilities for plant
Property taxes on plant
Utilities for office
Property taxes on office
Total cash payments
Ending cash balance before financing
Minimum cash balance desired
Projected cash excess (deficiency)
Ending cash balance
Prepaid property taxes = (tax on office+ tax on plant)*9
Accounts payable = $ 4,800
Utilities payable = Utilities on office+ utilities on plant
= $650 + $250
Preparing an operating budget—sales and production budgets
Lugo Company manufactures drinking glasses. One unit is a package of eight glasses, which sells for $30. Lugo projects sales for April will be 2,000 packages, with sales increasing by 250 packages per month for May, June, and July. On April 1, Lugo has 325 packages on hand but desires to maintain an ending inventory of 20% of the next month’s sales. Prepare a sales budget and a production budget for Lugo for April, May, and June.
Match the budget types to the definitions.
Budget Types Definitions
5. Financial a. Includes sales, production, and cost of goods sold budgets
6. Flexible b. Long-term budgets
7. Operating c. Includes only one level of sales volume
8. Operational d. Includes various levels of sales volumes
9. Static e. Short-term budgets
10. Strategic f. Includes the budgeted financial statements
Preparing a financial budget—budgeted balance sheet
Use the following June actual ending balances and July 31, 2018, budgeted amounts for Omas to prepare a budgeted balance sheet for July 31, 2018.
a. June 30 Merchandise Inventory balance, $17,770
b. July purchase of Merchandise Inventory, $4,400, paid in cash
c. July payments of Accounts Payable, $8,400
d. June 30 Accounts Payable balance, $10,700
e. June 30 Furniture and Fixtures balance, $34,100; Accumulated Depreciation balance, $29,880
f. June 30 total stockholders’ equity balance, $28,020
g. July Depreciation Expense, $500
h. Cost of Goods Sold, 60% of sales
i. Other July expenses, including income tax, $2,000, paid in cash
j. June 30 Cash balance, $11,600
k. July budgeted sales, all on account, $12,600
l. June 30 Accounts Receivable balance, $5,130
m. July cash receipts from collections on account, $14,700
(Hint: It may be helpful to trace the effects of each transaction on the accounting equation to determine the ending balance of each account.)
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