Categories

ACCT 386 - Week 5 - Homework - Question 5

ACCT 386 - Week 5 - Homework - Question 5
Price: $4.99
This Tutorial contains following Attachments
  • ACCT 386 - Week 5 - Homework - Question 5.doc
Qty:     - OR -   Add to Wish List

ACCT 386 - Week 5 - Homework - Question 5

There may be chances that the figures given in our question and your question doesn't matches. Don't worry, we are here to help you. Just write to us at studentwhiz@gmail.com and your answer is with you in no time.

 

Question 5

Janus Products, Inc., is a merchandising company that sells binders, paper, and other school supplies. The company is planning its cash needs for the third quarter. In the past, Janus Products has had to borrow money during the third quarter to support peak sales of back-to-school materials, which occur during August. The following information has been assembled to assist in preparing a cash budget for the quarter:

a.

Budgeted monthly absorption costing income statements for July–October are as follows:

 

  July

August

September

October

  Sales

$

34,000  

$

64,000  

$

62,000  

$

39,000  

  Cost of goods sold

 

20,000  

 

38,000  

 

26,000  

 

23,000  

 









  Gross margin

 

14,000  

 

26,000  

 

36,000  

 

16,000  

 









  Selling and administrative expenses:

 

 

 

 

 

 

 

 

       Selling expense

 

6,200  

 

10,400  

 

8,500  

 

8,000  

       Administrative expense*

 

3,200  

 

6,200  

 

6,600  

 

6,000  

 









  Total selling and administrative expenses

 

9,400  

 

16,600  

 

15,100  

 

14,000  

 









  Net operating income

$

4,600  

$

9,400  

$

20,900  

$

2,000  

 


















*Includes $1,400 depreciation each month.

b.

Sales are 20% for cash and 80% on credit.

c.

Credit sales are collected over a three-month period with 15% collected in the month of sale, 50% in the month following sale, and 35% in the second month following sale. May sales totaled $40,000, and June sales totaled $32,000.

d.

Inventory purchases are paid for within 15 days. Therefore, 50% of a month’s inventory purchases are paid for in the month of purchase. The remaining 50% is paid in the following month. Accounts payable for inventory purchases at June 30 total $12,000.

e.

The company maintains its ending inventory levels at 60% of the cost of the merchandise to be sold in the following month. The merchandise inventory at June 30 is $12,000.

f.

Land costing $5,000 will be purchased in July.

g.

Dividends of $1,500 will be declared and paid in September.

h.

The cash balance on June 30 is $5,000; the company must maintain a cash balance of at least this amount at the end of each month.

i.

The company has an agreement with a local bank that allows it to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $40,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.