P9-26 Picanuy Corporation
The following data relate to the
operations of Picanuy Corporation, a wholesale distributor of consumer goods:
Current assets as of December 31:
Cash . . . . . . . . . . . . . .
. . . . . . . . . . . . . $6,000
Accounts receivable . . . . . . .
. . . . . . . . $36,000
Inventory . . . . . . . . . . . .
. . . . . . . . . . . . $9,800
Buildings and equipment, net . .
. . . . . . . . $110,885
Accounts payable . . . . . . . .
. . . . . . . . . . . $32,550
Capital stock . . . . . . . . . .
. . . . . . . . . . . . . $100,000
Retained earnings . . . . . . . .
. . . . . . . . . . . $30,135
a. The gross margin is 30% of
sales. (In other words, cost of goods sold is 70% of sales.)
b. Actual and budgeted sales data
are as follows:
December (actual) . . . . . . . .
. . . . . . . . . . $60,000
January. . . . . . . . . . . . .
. . . . . . . . . . . . . . $70,000
February . . . . . . . . . . . .
. . . . . . . . . . . . . . $80,000
March . . . . . . . . . . . . . .
. . . . . . . . . . . . . . $85,000
April . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . $55,000
c. Sales are 40% for cash and 60%
on credit. Credit sales are collected in the month following sale. The accounts
receivable at December 31 are the result of December credit sales.
d. Each month’s ending inventory
should equal 20% of the following month’s budgeted cost of goods sold.
e. One-quarter of a month’s
inventory purchases is paid for in the month of purchase; the other
three-quarters is paid for in the following month. The accounts payable at
December 31 are the result of December purchases of inventory.
f. Monthly expenses are as
follows: commissions, $12,000; rent, $1,800; other expenses (excluding
depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation
is $2,400 for the quarter and includes depreciation on new assets acquired
during the quarter.
g. Equipment will be acquired for
cash: $3,000 in January and $8,000 in February.
h. Management would like to
maintain a minimum cash balance of $5,000 at the end of each month. The company
has an agreement with a local bank that allows the company to borrow in
increments of $1,000 at the beginning of each month, up to a total loan balance
of $50,000.
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.
Required:
Using the data above:
1. Complete the following
schedule:
Schedule of Expected Cash
Collections
January February March Quarter
Cash sales . . . . . . . . . .
$28,000
Credit sales . . . . . . . . . .
36,000
Total collections . . . . . . .
$64,000
2. Complete the following:
Merchandise Purchases Budget
January February March Quarter
Budgeted cost of goods sold . . .
. . . . . . $49,000*
Add desired ending inventory . .
. . . . . . . 11,200†
Total needs . . . . . . . . . . .
. . . . . . . . . . . . 60,200
Less beginning inventory . . . .
. . . . . . . . 9,800
Required purchases . . . . . . .
. . . . . . . . . $50,400
*$70,000 sales × 70% = $49,000.
†$80,000 × 70% × 20% = $11,200.
Schedule of Expected Cash
Disbursements—Merchandise Purchases
January February March Quarter
December purchases . . . . . . .
. . . . . . . . $32,550* $32,550
January purchases . . . . . . . .
. . . . . . . . . 12,600 $37,800 50,400
February purchases . . . . . . .
. . . . . . . . .
March purchases . . . . . . . . .
. . . . . . . . .
Total disbursements . . . . . . .
. . . . . . . . . $45,150
*Beginning balance of the
accounts payable.
3. Complete the following
schedule:
Schedule of Expected Cash
Disbursements—Selling and Administrative Expenses
January February March Quarter
Commissions . . . . . . . . . . .
. . . . . . . . . . $12,000
Rent . . . . . . . . . . . . . .
. . . . . . . . . . . . . . 1,800
Other expenses . . . . . . . . .
. . . . . . . . . . 5,600
Total disbursements . . . . . . .
. . . . . . . . . $19,400
4. Complete the following cash
budget:
Cash Budget
January February March Quarter
Cash balance, beginning . . . . .
. . . . . . . $ 6,000
Add cash collections . . . . . .
. . . . . . . . . . 64,000
Total cash available . . . . . .
. . . . . . . . . . 70,000
Less cash disbursements:
For inventory . . . . . . . . . .
. . . . . . . . . . 45,150
For operating expenses . . . . .
. . . . . . . 19,400
For equipment . . . . . . . . . .
. . . . . . . . 3,000
Total cash disbursements . . . .
. . . . . . . . 67,550
Excess (defi ciency) of cash . .
. . . . . . . . . 2,450
Financing Etc.
5. Prepare an absorption costing
income statement, similar to the one shown in Schedule 9 in the chapter, for
the quarter ended March 31.
6. Prepare a balance sheet as of
March 31.
TUTORIAL PREVIEW
1.
Schedule of expected cash collections:
|
|
January
|
February
|
March
|
Quarter
|
|
Cash sales
|
$28,000
|
$32,000
|
$34,000
|
$ 94,000
|
|
Credit sales*
|
36,000
|
42,000
|
48,000
|
126,000
|
|
Total collections
|
$64,000
|
$74,000
|
$82,000
|
$220,000
|
File name: P9-26 Picanuy Corporation.doc
File type: .doc PRICE: $15
