The Sweetwater Candy Company is preparing its budget for next year and has asked you to...

  
 
   

Transcribed Image Text:

The Sweetwater Candy Company is preparing its budget for next year and has asked you to prepare a cash budget for the first quarter (January-March) of next year. Information needed for the cash budget is listed below in the gray box. The requirements are further below in the green box. Selling price for a single box of chocolates: $24 per unit Budgeted total sales are: 40% cash sales 60% credit sales • Credit sales are collected in cash as follows: 75% collected in the month following the sale 25% collected in the 2nd month following the sale • At December 31, the balance in Accounts Receivable is $19,620, which represents the uncollected portions of the November and December sales. November total sales 850 units December total sales 1150 units • Budgeted sales for the next four months follow: February March April 1,550 January Sales in units 1,350 1,700 1,600 • The company desires merchandise inventory equal to 30% of the next month's sales in units. The December 31 balance of merchandise inventory is 405 units, and the cost to purchase one box of chocolates is $10 per unit. • Inventory purchases are paid in cash as follows: 70% paid in the month of purchase 30% paid in the month following purchase • At December 31, the balance of Accounts Payable is $3,900, which represents the unpaid portion of December's purchases. Operating expenses that require payment are paid in the month incurred. Operating expenses include: Sales commissions are 10% of sales. Shipping is 3% of sales. Office salaries are $4,500 per month. Rent is $7,000 per month. Depreciation expense is $5,250 per month. • In March, management expects to sell office equipment that originally cost $11,000 at a gain of $1,000. Accumulated depreciation on this equipment at the time of sale will be $6,000. The equipment will be sold for cash. • In March, management plans to either overhaul its old delivery truck or purchase a new truck. Based on the decision you made when you completed the capital budgeting analysis, include the cash disbursement for the truck in March. • A minimum cash balance of $150,000 is required, and the cash balance at December 31 is $15,000. • Loans are obtained at the end of a month in which a cash shortage occurs. • Interest is 10% annually, based on the loan balance at the beginning of the month, and must be paid each month. If an excess of cash exists, loan repayments are made at the end of the month. At December 31, the loan balance is $600 Required: (A) Prepare the company's cash budget for each of the months of January, February, and March that includes information on the loan balance. Show the ending loan balance at December 31. (B) Show supplementary schedules for cash receipts from customers, purchases, and cash disbursements for purchases. The Sweetwater Candy Company is preparing its budget for next year and has asked you to prepare a cash budget for the first quarter (January-March) of next year. Information needed for the cash budget is listed below in the gray box. The requirements are further below in the green box. Selling price for a single box of chocolates: $24 per unit Budgeted total sales are: 40% cash sales 60% credit sales • Credit sales are collected in cash as follows: 75% collected in the month following the sale 25% collected in the 2nd month following the sale • At December 31, the balance in Accounts Receivable is $19,620, which represents the uncollected portions of the November and December sales. November total sales 850 units December total sales 1150 units • Budgeted sales for the next four months follow: February March April 1,550 January Sales in units 1,350 1,700 1,600 • The company desires merchandise inventory equal to 30% of the next month's sales in units. The December 31 balance of merchandise inventory is 405 units, and the cost to purchase one box of chocolates is $10 per unit. • Inventory purchases are paid in cash as follows: 70% paid in the month of purchase 30% paid in the month following purchase • At December 31, the balance of Accounts Payable is $3,900, which represents the unpaid portion of December's purchases. Operating expenses that require payment are paid in the month incurred. Operating expenses include: Sales commissions are 10% of sales. Shipping is 3% of sales. Office salaries are $4,500 per month. Rent is $7,000 per month. Depreciation expense is $5,250 per month. • In March, management expects to sell office equipment that originally cost $11,000 at a gain of $1,000. Accumulated depreciation on this equipment at the time of sale will be $6,000. The equipment will be sold for cash. • In March, management plans to either overhaul its old delivery truck or purchase a new truck. Based on the decision you made when you completed the capital budgeting analysis, include the cash disbursement for the truck in March. • A minimum cash balance of $150,000 is required, and the cash balance at December 31 is $15,000. • Loans are obtained at the end of a month in which a cash shortage occurs. • Interest is 10% annually, based on the loan balance at the beginning of the month, and must be paid each month. If an excess of cash exists, loan repayments are made at the end of the month. At December 31, the loan balance is $600 Required: (A) Prepare the company's cash budget for each of the months of January, February, and March that includes information on the loan balance. Show the ending loan balance at December 31. (B) Show supplementary schedules for cash receipts from customers, purchases, and cash disbursements for purchases.

Answer rating: 100% (QA)

a Cash Budget for each of Month of January February March Particulars January February March Opening Balance of Cash A Note 1 150000 150000 150000 Cash Collections Cash Receipts of Sales Schedule 1 28... View the full answer