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Week 5 Assignment Accounting Capstone

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Tuvshu Tuvshu
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3 views

Week 5 Assignment Accounting Capstone

Uploaded by

Tuvshu Tuvshu
Copyright
© © All Rights Reserved
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Refer to the data for Garden Sales, Inc., in Problem 8–24.

The company’s president is interested in knowing how reducing inve

Sales continue to be 20% for cash and 80% on credit. However, credit sales from April, May, and June are collected over a thre

The company maintains its ending inventory levels for April, May, and June at 15% of the cost of merchandise to be sold in the

All other information from Problem 8–24 that is not referred to above remains the same.

Required:

Using the president’s new assumptions in (1) above, prepare a schedule of expected cash collections for April, May, and June a

Feb March April May June


Sales $ 200,000 $ 300,000 $ 600,000 $ 900,000 $ 500,000
cash $ 40,000 $ 60,000 $ 120,000 $ 180,000 $ 100,000
credit $ 160,000 $ 240,000 $ 480,000 $ 720,000 $ 400,000
25% $ 40,000 $ 60,000 $ 120,000 $ 180,000 $ 100,000
65% $ 104,000 $ 156,000 $ 312,000 $ 468,000 $ 260,000
10% $ 16,000 $ 24,000 $ 48,000 $ 72,000 $ 40,000
Cash Collection $ 412,000 $ 672,000 $ 716,000

Using the president’s new assumptions in (2) above, prepare the following for merchandise inventory:

A merchandise purchases budget for April, May, and June.

April May June Total


Inventory beginning $ 84,000 $ 135,000 $ 75,000
ending $ 135,000 $ 75,000 $ 60,000
COGS $ 420,000 $ 630,000 $ 350,000
Purchase $ 471,000 $ 570,000 $ 335,000 $ 1,376,000

A schedule of expected cash disbursements for merchandise purchases for April, May, and June and for the quarter in total.

April May June Total


Payables beginning $ 126,000 $ 235,500 $ 285,000
Purchase $ 471,000 $ 570,000 $ 335,000
Cash paid $ 361,500 $ 520,500 $ 452,500 $ 1,334,500

Using the president’s new assumptions, prepare a cash budget for April, May, and June, and for the quarter in total.

April May June Total


Beginning cash 52000 $ 53,500 $ 189,000
Cash receipts $ 412,000 $ 672,000 $ 716,000 $ 1,800,000
Cash payments $ -
Payables $ 361,500 $ 520,500 $ 452,500 $ 1,334,500
Dividend $ 49,000 $ 49,000
Land $ 16,000 $ 16,000
net Cash flow $ 1,500 $ 135,500 $ 263,500 $ 400,500
Ending cash flow $ 53,500 $ 189,000 $ 452,500

Prepare a brief memorandum for the president explaining how his revised assumptions affect the cash budget.

It is mainly due to collecting 25% in the month of sales rather than 10% and 10% of sales after 3 months rather than 20%
ested in knowing how reducing inventory levels and collecting accounts receivable sooner will impact the cash budget. He revises the cash

, and June are collected over a three-month period with 25% collected in the month of sale, 65% collected in the month following sale, an

ost of merchandise to be sold in the following month. The merchandise inventory at March 31 remains $84,000 and accounts payable for i

ollections for April, May, and June and for the quarter in total.

Total

$ 1,800,000

e inventory:

June and for the quarter in total.

d for the quarter in total.


ect the cash budget.

fter 3 months rather than 20%


get. He revises the cash collection and ending inventory assumptions as follows:

month following sale, and 10% in the second month following sale. Credit sales from February and March are collected during the second q

d accounts payable for inventory purchases at March 31 remains $126,000.


e collected during the second quarter using the collection percentages specified in Problem 8–24.

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