Use the original schedule of cash receipts completed in Exercise E22-29, Requirement 1, and the schedule of
Question:
Use the original schedule of cash receipts completed in Exercise E22-29, Requirement 1, and the schedule of cash payments completed in Exercise E22-28 to complete a cash budget for Armand Company. Additional information: Armand’s beginning cash balance is $3,000, and Armand desires to maintain a minimum ending cash balance of $3,000. Armand borrows cash as needed at the beginning of each month in increments of $1,000 and repays the amounts borrowed in increments of $1,000 at the beginning of months when excess cash is available. The interest rate on amounts borrowed is 8% per year. Interest is paid at the beginning of the month on the outstanding balance from the previous month.
Reference
27. Preparing a financial budget—schedule of cash receipts, sensitivity analysis
Armand Company projects the following sales for the first three months of the year: $10,600 in January; $12,300 in February; and $12,900 in March. The company expects 60% of the sales to be cash and the remainder on account. Sales on account are collected 50% in the month of the sale and 50% in the following month. The Accounts Receivable account has a zero balance on January 1. Round to the nearest dollar.
Requirements
1. Prepare a schedule of cash receipts for Armand for January, February, and March. What is the balance in Accounts Receivable on March 31?
2. Prepare a revised schedule of cash receipts if receipts from sales on account are 60% in the month of the sale, 30% in the month following the sale, and 10% in the second month following the sale. What is the balance in Accounts Receivable on March 31?
28. Preparing a financial budget—schedule of cash payments
Armand Company has the following projected costs for manufacturing and selling and administrative expenses:
All costs are paid in month incurred except: direct materials, which are paid in the month following the purchase; utilities, which are paid in the month after incurred; and property taxes, which are prepaid for the year on January 2. The Accounts Payable and Utilities Payable accounts have a zero balance on January 1. Prepare a schedule of cash payments for Armand for January, February, and March. Determine the balances in Prepaid Property Taxes, Accounts Payable, and Utilities Payable as of March 31.
Horngrens Accounting
ISBN: 978-0134674681
12th edition
Authors: Tracie L. Miller-nobles, Brenda L. Mattison, Ella Mae Matsumura