PROBLEM 9-42

1. Sales budget:
20x0
December
Total sales ........................$800,000
Cash sales*.......................200,000
Sales on account ............600,000

January
$880,000
220,000
660,000

20x1_______________________
February March
First Quarter
$968,000 $1,064,800 $2,912,800
242,000
266,200
728,200
726,000
798,600
2,184,600

*25% of total sales.

75% of total sales.
2. Cash receipts budget:
January
Cash sales .............................. $220,000
Cash collections from credit
sales made during current
month*..........................................66,000
Cash collections from credit
sales made during preceding
month...................................... 540,000
Total cash receipts ............... $826,000

20x1
February March
$242,000 $266,200

First Quarter
$ 728,200

72,600

79,860

218,460

594,000
$908,600

653,400
999,460

1,787,400
$2,734,060

*10% of current month's credit sales.

90% of previous month's credit sales.
3. Purchases budget:
20x0
December January
Budgeted cost of
goods sold ..............
$560,000
Add: Desired
ending inventory.....
308,000
Total goods
needed.....................
$868,000
Less: Expected
beginning
inventory .................
280,000
Purchases..................... $588,000

20x1______________________
February March
First Quarter

$616,000

$677,600

$745,360

$2,038,960

338,800

372,680

372,680*

372,680

954,800

$1,050,280 $1,118,040 $2,411,640

308,000
$646,800

338,800
$711,480

372,680
$745,360

308,000**
$2,103,640

4. Cash disbursements budget:

January
Inventory purchases:
Cash payments for purchases
during the current month*........
$258,720
Cash payments for purchases
during the preceding
month ........................................
352,800
Total cash payments for
inventory purchases .......................$611,520
Other expenses:
Sales salaries................................... $ 42,000
Advertising and promotion ............ 32,000
Administrative salaries................... 42,000
Interest on bonds** ......................... 30,000
Property taxes**............................... -0Sales commissions......................... 8,800
Total cash payments for other
expenses ..........................................$154,800
Total cash disbursements...............$766,320

20x1
February March

First Quarter

$284,592

$298,144

$ 841,456

388,080

426,888

1,167,768

$672,672

$725,032

$2,009,224

$ 42,000
32,000
42,000
-010,800
9,680

$ 42,000
32,000
42,000
-0-010,648

$ 126,000
96,000
126,000
30,000
10,800
29,128

$136,480
$809,152

$126,648
$851,680

$ 417,928
$2,427,152

*40% of current month's purchases [see requirement (3)].

60% of the prior month's purchases [see requirement (3)].
5. Summary cash budget:
20x1
January
February March
First Quarter
$ 826,000 $ 908,600 $ 999,460 2,734,060

Cash receipts [from req. (2)].

Cash disbursements
[from req. (4)] ...................................(766,320)
Change in cash balance
during period due to operations.... $ 59,680
Sale of marketable securities
(1/2/x1) ..............................................30,000
Proceeds from bank loan
(1/2/x1) ..............................................200,000
Purchase of equipment ..................(250,000)
Repayment of bank loan
(3/31/x1) ............................................
Interest on bank loan* ..........................
Payment of dividends...........................
Change in cash balance during
first quarter ......................................
Cash balance, 1/1/x1.............................
Cash balance, 3/31/x1...........................

(809,152)

(851,680)

(2,427,152)

$ 99,448

$147,780

$ 306,908
30,000
200,000
(250,000)

(200,000)
(5,000)
(100,000)

(200,000)
(5,000)
(100,000)
$ (18,092)
70,000
$ 51,908

*$200,000 10% per year 1/4 year = $5,000

6. Analysis of short-term financing needs:
Projected cash balance as of December 31, 20x0....................................... $ 70,000
Less: Minimum cash balance........................................................................ 50,000
Cash available for equipment purchases..................................................... $ 20,000
Projected proceeds from sale of marketable securities............................. 30,000
Cash available................................................................................................. $ 50,000
Less: Cost of investment in equipment........................................................ 250,000
Required short-term borrowing..................................................................... $(200,000)
7.GLOBAL ELECTRONICS COMPANY
BUDGETED INCOME STATEMENT
FOR THE FIRST QUARTER OF 20X1
Sales revenue..........................................................................
Less: Cost of goods sold.......................................................
Gross margin...........................................................................
Selling and administrative expenses:
Sales salaries.....................................................................
Sales commissions ...........................................................
Advertising and promotion ..............................................
Administrative salaries.....................................................
Depreciation.......................................................................
Interest on bonds ..............................................................
Interest on short-term bank loan .....................................
Property taxes....................................................................
Total selling and administrative expenses ..........................
Net income...............................................................................

$2,912,800
2,038,960
$ 873,840
$126,000
29,128
96,000
126,000
150,000
15,000
5,000
5,400
552,528
$ 321,312

8.GLOBAL ELECTRONICS COMPANY

BUDGETED STATEMENT OF RETAINED EARNINGS
FOR THE FIRST QUARTER OF 20X1
Retained earnings, 12/31/x0.......................................................................... $ 215,000
Add: Net income ............................................................................................ 321,312
Deduct: Dividends ......................................................................................... 100,000
Retained earnings, 3/31/x1............................................................................ $ 436,312

9.GLOBAL ELECTRONICS COMPANY

BUDGETED BALANCE SHEET
MARCH 31, 20X1
Cash............................................................................................................... $ 51,908
Accounts receivable*......................................................................................718,740
Inventory......................................................................................................... 372,680
Buildings and equipment (net of accumulated depreciation).................1,352,000
Total assets ............................................................................................... $2,495,328
Accounts payable**......................................................................................$ 447,216
Bond interest payable .................................................................................... 10,000
Property taxes payable................................................................................... 1,800
Bonds payable (10%; due in 20x6)................................................................ 600,000
Common Stock..............................................................................................1,000,000
Retained earnings........................................................................................... 436,312
Total liabilities and stockholders' equity...................................................$2,495,328
*Accounts receivable, 12/31/x0...................................................................... 540,000
Sales on account [req. (1)] ...........................................................................2,184,600
Total cash collections from credit sales
[(req. (2)] ($218,460 + $1,787,400).............................................................. (2,005,860)
Accounts receivable, 3/31/x1.......................................................................$ 718,740
Buildings

and equipment (net), 12/31/x0.................................................$1,252,000

Cost of equipment acquired .......................................................................... 250,000
Depreciation expense for first quarter..........................................................(150,000)
Buildings and equipment (net), 3/31/x1 ................................................... $1,352,000
**Accounts payable, 12/31/x0 ......................................................................$ 352,800
Purchases [req. (3)].......................................................................................2,103,640
Cash payments for purchases [req. (4)] ...................................................(2,009,224)
Accounts payable, 3/31/x1 ...........................................................................$ 447,216