Problem 13-54 Budgeted Purchases and Cash Flows (LO 13-4, 5, 6) Mast Corporation
ID: 2570296 • Letter: P
Question
Problem 13-54 Budgeted Purchases and Cash Flows (LO 13-4, 5, 6)
Mast Corporation seeks your assistance in developing cash and other budget information for May, June, and July. At April 30, the company had cash of $11,000, accounts receivable of $879,000, inventories of $143,880, and accounts payable of $42,878. The budget is to be based on the following assumptions.
Each month’s sales are billed on the last day of the month.
Customers are allowed a 2 percent discount if payment is made within 10 days after the billing date. Receivables are recorded in the accounts at their gross amounts (not net of discounts).
The billings are collected as follows: 70 percent within the discount period, 15 percent by the end of the month, and 12 percent by the end of the following month. Three percent is uncollectible.
Purchase data are as follows.
Of all purchases of merchandise and selling, general, and administrative expenses, 56 percent is paid in the month purchased and the remainder in the following month.
The number of units in each month’s ending inventory equals 120 percent of the next month’s units of sales.
The cost of each unit of inventory is $11.
Selling, general, and administrative expenses, of which $3,000 is depreciation, equal 20 percent of the current month’s sales.
Actual and projected sales follow:
c. Compute the budgeted cash collections during May. (Do not round intermediate calculations.)
d. Compute the budgeted cash disbursements during June. (Do not round intermediate calculations.)
e. Compute the budgeted number of units of inventory to be purchased during July.
Dollars Units March $ 188,800 11,800 April 161,600 10,100 May 174,400 10,900 June 198,400 12,400 July 176,000 11,000 August 14,200 11,200c. Compute the budgeted cash collections during May. (Do not round intermediate calculations.)
d. Compute the budgeted cash disbursements during June. (Do not round intermediate calculations.)
e. Compute the budgeted number of units of inventory to be purchased during July.
Explanation / Answer
c. Budgeted cash collections during May: $255313.60
d. Budgeted cash disbursements during June: $162071.20
e. Budgeted number of units of inventory to be purchased during July: 11240 units
Collections on account: March sales (12%) 22656 April sales within discount period (70% - 2%) 110857.60 April sales (15%) 121800 Total cash collections 255313.60