Chapter7Solutions

# Chapter7Solutions - Brief Exercise 7-2(30 minutes 1 July...

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Unformatted text preview: Brief Exercise 7-2 (30 minutes) 1. July August Septem- ber Total May sales: \$430,000 × 10%............ \$ 43,000 \$ 43,000 June sales: \$540,000 × 70%, 10%... 378,000 \$ 54,000 432,000 July sales: \$600,000 × 20%, 70%, 10%............................ 120,000 420,000 \$ 60,000 600,000 August sales: \$900,000 × 20%, 70%... 180,000 630,000 810,000 September sales: \$500,000 × 20%............ 100,000 100,000 Total cash collections....... \$541,000 \$654,000 \$790,000 \$1,985,000 Notice that even though sales peak in August, cash collections peak in September. This occurs because the bulk of the company’s customers pay in the month following sale. The lag in collections that this creates is even more pronounced in some companies. Indeed, it is not unusual for a company to have the least cash available in the months when sales are greatest. 2. Accounts receivable at September 30: From August sales: \$900,000 × 10%...... \$ 90,000 From September sales: \$500,000 × (70% + 10%)...................... 400,000 Total accounts receivable........................ \$490,000 Brief Exercise 7-3 (15 minutes) July August September Quarter Budgeted sales in units............. 30,000 45,000 60,000 135,000 Add desired ending inventory*. . 4,500 6,000 5,000 5,000 Total needs................................ 34,500 51,000 65,000 140,000 Less beginning inventory.......... 3,000 4,500 6,000 3,000 Required production.................. 31,500 46,500 59,000 137,000 *10% of the following month’s unit sales. Brief Exercise 7-8 (20 minutes) Forest Outfitters Cash Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Cash balance, beginning............. \$ 50,000 \$ 30,000 \$ 69,800 \$ 49,800 \$ 50,000 Total cash receipts.. 340,000 670,000 410,000 470,000 1,890,000 Total cash available 390,000 700,000 479,800 519,800 1,940,000 Less total cash disbursements...... 530,000 450,000 430,000 480,000 1,890,000 Excess (deficiency) of cash available over disbursements......disbursements....
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## This note was uploaded on 03/24/2009 for the course ATG 212 taught by Professor Dascher during the Spring '09 term at Stetson.

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Chapter7Solutions - Brief Exercise 7-2(30 minutes 1 July...

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