Sunday 7 October 2012

The following data relate to the operations of Picanuy Corporation, a wholesale distributor of consumer goods:


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. (Omit the "$" sign in your response.)

Schedule of Expected Cash Collections

January
February
March
Quarter
  Cash sales
$28,000      
$  correct  
$  correct  
$  correct  
  Credit sales
36,000      
 correct  
 correct  
 correct  


  Total collections
$64,000      
$  correct  
$  correct  
$  correct  





2.
Complete the following: (Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive values. Omit the "$" sign in your response.)

Merchandise Purchases Budget

  January

February
  March
  Quarter
  Budgeted cost of goods sold
$49,000
*
$  correct
$  correct  
$  correct  
  Add desired ending inventory
11,200
 correct
 correct  
 correct  


  Total needs
60,200

 correct
 correct  
 correct  
  Less beginning inventory
9,800

 correct
 correct  
 correct  


  Required purchases
$50,400

$  correct
$  correct  
$  correct  





*$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
*
$  correct  

$  correct  

$ 32,550  
  January purchases

12,600

37,800  

 correct  

50,400  
  February purchases

 correct

 correct  

 correct  

  correct  
  March purchases

 correct

 correct  

 correct  

 correct  



  Total disbursements

$ 45,150

$  correct  

$  correct  

$  correct  






*Beginning balance of the accounts payable.

3.
Complete the following schedule: (Omit the "$" sign in your response.)

  Schedule of Expected Cash Disbursements—Selling and Administrative Expenses

January
February
March
Quarter
  Commissions
$12,000      
$  correct  
$  correct  
$  correct  
  Rent
1,800      
 correct  
 correct  
 correct  
  Other expenses
5,600      
 correct  
 correct  
 correct  


  Total disbursements
$19,400      
$  correct  
$  correct  
$  correct  





4.
Complete the following cash budget: (Input all amounts as positive values except cash deficiency, repayments and interest which should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Picanuy Corporation
  Cash Budget

January
February
March
Quarter
  Cash balance, beginning
$ 6,000  
$  correct  
$  correct  
$  correct  
  Add cash collections
64,000  
 correct  
 correct  
 correct  


  Total cash available
70,000  
 correct  
 correct  
 correct  


  Less cash disbursements:




    For inventory
45,150  
 correct  
  correct  
 correct  
    For operating expenses
19,400  
 correct  
   
 correct  
    For equipment
3,000  
 correct  
 correct  
 correct  


  Total cash disbursements
67,550  
 correct  
 correct  
 correct  


  Excess (deficiency) of cash
2,450  
 correct  
 correct  
 correct  


  Financing:




    Borrowings
 correct  
 correct  
 correct  
 correct  
    Repayments
 correct  
 correct  
 correct  
 correct  
    Interest
 correct  
 correct  
   
   


  Total financing
 correct  
   
   
   


  Cash balance, ending
$  correct  
$  correct  
$    
$    





5.
Prepare an absorption costing income statement for the quarter ended March 31. (Input all amounts as positive values. Omit the "$" sign in your response.)

Picanuy Corporation
Income Statement
For the Quarter Ended March 31
   correct

$  correct  
  Cost of goods sold:


        correct
$  correct  

        correct
 correct  




        correct
 correct  

        correct
 correct  
 correct  


   correct

 correct  
  Selling and administrative expenses:


        correct
 correct  

        correct
 correct  

        correct
 correct  

        correct
 correct  
 correct  



   correct

 correct  
   correct

 correct  



   correct

$  correct  






6.
Prepare a balance sheet as of March 31. (Be sure to list the assets and liabilities in order of their liquidity. Omit the "$" sign in your response.)

Picanuy Corporation
Balance Sheet
March 31
Assets
  Current assets:


        correct

$    
        correct

 correct  
        correct

 correct  



  Total current assets

   
   correct

 correct  



 Total assets

$    




Liabilities and Stockholders’ Equity
   correct

$  correct  
   correct

   
  Stockholders' equity:


        correct
$  correct  

        correct
 correct  
 correct  



  Total liabilities and stockholders’ equity

$    





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