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s-41 Cash and payments, multiple choice. (CMA) Read Appendix SA. Information pertaining to Noskey Corporation's sales revenue is presented in the following table NOVEMBER DECEMBER (ACTUAL) (BUDGET) JANUARY 19.5 (BUDGET) 19.5 19.5 Cash sales 80,000 $100,000 60,000 Total sales 320,000 420,000 240,000 Management estimates thatS% of credit sales are uncollectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the reminder in the month following the sale. Purchases of inventory each month are 70% of the next month's projected total sales. All purchases of inventory are on account, 25% are paid in the moth of purchase, and the remainder are paid in the month following the purchase Required 1. Noskey's budgeted cash collections in December 19 5 from November 195 credit sales are (a) $144,000, (b) $136,800, (c) S96,000, (d) $91,200, (e) none of these 2. Noskey's budgeted total cash receipts in January 19_6 are (a) $240,000, (b) $294,000, (c) $299,400, (d) $239,400, (e) none of these 3. Noskey's budgeted total cash payments in December 19 5 for inventory purchases are (a) $405,000, (b) $283,500, (c) $240,000, (d) $168,000, (e) none of these 5-42 Collection and disbursements. (CPA) Read Appendix SA. The following information was available from Montero Corporation's books: 19.2 PURCHASES SALES $42,000 48,000 72,000 Feb. Mar Apr 60,000 78,000 54,000 Collections from customers are normally 70% in the month of sale, 20% in the month following the sale, and 9% in the second month following the sale. The balance is expected to be uncollectible. Montero takes full advantage of the 2% discount allowed on purchases paid for by the tenth of the following month. Purchases of May are budgeted at $60,000, while sales for Mar are forecasted at $66,000. Cash disbursements for expenses are expected to be $14,400 for the month of May. Montero's cash balance Required: Prepare the following schedules 1. Expected cash collections during May 2. Expected cash disbursements during May 3. Expected cash balance at May 31 5-43 Comprehensive budget; fill in schedules. Read Appendix SA. Ignore income taxes. Following is certain information relative to the position and business of the Newport Stores Company. Current assets as of Sept. 30 12,000 Current liabilities as of Sept. 30 None 48,000 December Credit sales: Sales are 75% for cash, ano 25% on credit. Assume that credit accounts are all collected within 30 days from sale. The accounts receivable on September 30 are the results of the credit sales for September (25% of $40,000). Gross profit averages 30% of sales. Purchase discounts are treated on the income statement as "other income" by this company Expenses: Salaries and wages average 15% of monthly sales; rent, 5%; all other expenses, excluding depreciation, 4%. Assume that these expenses are disbursed each month. Depreciation is $1,000 per Purchases: There is a basic inventory of $30,000. The policy is to purchase each month additional inventory in the amount necessary to provide for the following month's sales. Terms on purchases are 2/10, n/30. Assume that payments are made in the month of purchase, and that all discounts are taken Fixtures: In October, $600 is spent for fixtures, and in November, $400 is to be expended for this Assume that a minimum cash balance of $8,000 is to be maintained. Assume also that all borrowings are effective at the beginning of the month and all repayments are made at the end of the month of repayment. Loans are repaid when sufficient cash is available. Interest is paid only at the time of repaying principal. Interest cash than is necessary and wants to repay a rate is 18% per annum. Management does not want to borrow any more s soon as possible when cash is available Required: On the basis of the facts as given above: 1. Complete Schedule A. Schedule A Budgeted Monthly Dollar Receipts TEM SEPTEMBER OCTOBER NOVEMBER DECEMBER $80,000 $40,000 10,000 $60,000 Total sales Credit sales Cash sales $48,000 12,000 Receipts: Cash sales $36,000 Collections on accounts 10,000 $46,000 receivable Total 2. Complete Schedule B. Note that purchases are 70% of next month's sales. Schedule B Budgeted Monthly Cash s for Purchases OCTOBER NOVEMBER DECEMBER TOTAL ITEM $42,000 840 $41,160 Purchases Less 2% cash discount 3. Complete Schedule C. Schedule C Budgeted Monthly Cash Disbursements for Operating Expenses ITEM OCTOBER NOVEMBER DECEMBER TOTAL Salaries and Wages Rent Other expenses $7,200 2,400 1,920 Total $11,520 4. Complete Schedule D. Schedule D Budgeted Total Monthly Disbursements ITEM OCTOBER NOVEMBER DECEMBER TOTAL Purchases Operating expenses Fixtures $41,160 11,520 600 Total $53,280 5. Complete Schedule E Schedule Budgeted Cash Receipts and Disbursements ITEM OCTOBER NOVEMBER DECEMBER TOTAL Receipts $46,000 53,280 $7,280 Net cash increase Net cash decrease 6. Complete Schedule F (assume that borrowings must be made in multiples of $1,000) Schedule F Financing Required by Newport Stores Company ITEM OCTOBER NOVEMBER DECEMBER TOTAL Opening Cash Net cash increase 12,000 7,280 Net cash decrease Chas position before Financing 4,720 4,000 Financing required Interest payments Financing retired Closing balance $8,720 7. 8. 9. What do you think is the most logical means of arranging the financing needed by Newport Stored Company? Prepare a budgeted (pro forma) income statement for the fourth quarter and a balance sheet as of December 31. Ignore income taxes. Certain simplifications have been introduced in this problem. What complicating factors would be met in a typical business situation

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