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

 

 

 

 

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.

Half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory.

Monthly expenses are as follows: commissions, $9,750; rent, $1,400; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $3,160 for the quarter and includes depreciation on new assets acquired during the quarter.

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.

 

 

 

 

 

  Current assets as of December 31:

 

 

     Cash

$

5,700

     Accounts receivable

$

39,000

     Inventory

$

10,700

  Buildings and equipment, net

$

114,800

  Accounts payable

$

32,730

  Capital stock

$

100,000

  Retained earnings

$

37,470

 

     

1. Complete the following schedule Schedule of Expected Cash Collections January February March Quarter Cash sales S 29,400 20.000 Credit sales Total collections S eB400 S 05 0 0 2. Complete the following: Merchandise Purchases Budget March January February Quarter Budgeted cost of goods sold 5 51450 11.340 Add desired ending inventory Total needs 62,790 10,700 Less beginning inventory 52.080 Required purchases Budgeted cost of goods sold for January*$73,500 sales x 70% S51,450. Add desired ending inventory for January -$81,000 x 70% x 20% $11 340. Schedule of Expected Cash Disbursements-Merchandise Purchases January February March Quarter December purchases 32,730.00 32,730.00 S January purchases 26,045.00 S 26.045.00 52,000.00 February purchases March purchases 3. Complete the following schedule: Schedule of Expected Cash Disbursements-Selling and Adminis trative Expel January February March Quarter Commissions 9,750 1,400 Rent Other expenses 4,410 15,560

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