Monthly Cash Budget Grove, Inc. is a wholesaler for its only product, deluxe wireless electric drills, which sell for $90 each and cost Grove $54 each. On December 1, 2019, Grove's management requested a cash budget for December. The following selected account balances at November 30, 2019, were gathered by the accounting department: Cash $135,000 Marketable securities (at cost) 210,000 Accounts receivable (all trade) 1,710,000 Inventories (15,000 units) 810,000 Operating expenses payable 140,400 Accounts payable (all merchandise) 583,200 Note payable (due 12/31/2019 393,000 Actual sales for the months of October and November were 20,000 and 30,000 units, respectively. Projected unit sales for December and January are 50,000 and 40,000, respectively. Experience indicates that 50% of sales should be collected in the month of sale, 30% in the month following sale, and the balance in the second month following sale. Uncollectible accounts, returns, and allowances are negligible. Planned purchases should provide ending inventories equal to 30% of next month's unit sales volume. Approximately 70% of the purchases are paid for in the month of purchase and the balance in the following month. Monthly operating expenses are budgested at $8.10 per unit sold plus a fixed amount of $189,000, including depreciation of $81,000. Except for depreciation, 60% of operating expenses are paid in the month incurred and the balance in the following month. Interest expense is included in operating expenses. Special anticipated year-end transactions include the following: 1. Declaration of a $22,500 cash divided to be paid 2 weeks after the December 20 date of record. 2. Sale of one-half of the marketable securities held on November 30; a gain of $21,000 is anticipated. 3. Pay off the note payable due December 31, 2019. 4. Trade-in of an old computer originally costing $675,000 and now having accumulated depreciation of $540,000 at a gain of $157,500 on a new computer costing $1,350,000. Sufficient cash will be paid at the time of trade-in-so that only 50% of the total price will have to be financed. 5. Grove's treasurer has a policy of maintaining a minimum month-end cash balance of $135,000 but wants to raise this to $225,000 at December 31. She has a standing arrangement with the bank to borrow any amount up to a limit of $450,000. Required Prepare a cash budget for Grove, Inc., for December 2019.

Monthly Cash Budget Grove, Inc. is a wholesaler for its only product, deluxe wireless electric drills, which sell for $90 each and cost Grove $54 each. On December 1, 2019, Grove's management requested a cash budget for December. The following selected account balances at November 30, 2019, were gathered by the accounting department: Cash $135,000 Marketable securities (at cost) 210,000 Accounts receivable (all trade) 1,710,000 Inventories (15,000 units) 810,000 Operating expenses payable 140,400 Accounts payable (all merchandise) 583,200 Note payable (due 12/31/2019 393,000 Actual sales for the months of October and November were 20,000 and 30,000 units, respectively. Projected unit sales for December and January are 50,000 and 40,000, respectively. Experience indicates that 50% of sales should be collected in the month of sale, 30% in the month following sale, and the balance in the second month following sale. Uncollectible accounts, returns, and allowances are negligible. Planned purchases should provide ending inventories equal to 30% of next month's unit sales volume. Approximately 70% of the purchases are paid for in the month of purchase and the balance in the following month. Monthly operating expenses are budgested at $8.10 per unit sold plus a fixed amount of $189,000, including depreciation of $81,000. Except for depreciation, 60% of operating expenses are paid in the month incurred and the balance in the following month. Interest expense is included in operating expenses. Special anticipated year-end transactions include the following: 1. Declaration of a $22,500 cash divided to be paid 2 weeks after the December 20 date of record. 2. Sale of one-half of the marketable securities held on November 30; a gain of $21,000 is anticipated. 3. Pay off the note payable due December 31, 2019. 4. Trade-in of an old computer originally costing $675,000 and now having accumulated depreciation of $540,000 at a gain of $157,500 on a new computer costing $1,350,000. Sufficient cash will be paid at the time of trade-in-so that only 50% of the total price will have to be financed. 5. Grove's treasurer has a policy of maintaining a minimum month-end cash balance of $135,000 but wants to raise this to $225,000 at December 31. She has a standing arrangement with the bank to borrow any amount up to a limit of $450,000. Required Prepare a cash budget for Grove, Inc., for December 2019.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

Problem 17E

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P9-2A	Monthly Cash Budget
	Grove, Inc. is a wholesaler for its only product, deluxe wireless electric drills, which sell for $90 each and cost Grove $54 each. On December 1, 2019, Grove's management requested a cash budget for December. The following selected account balances at November 30, 2019, were gathered by the accounting department:




	Cash	$135,000
	Marketable securities (at cost)	210,000
	Accounts receivable (all trade)	1,710,000
	Inventories (15,000 units)	810,000
	Operating expenses payable	140,400
	Accounts payable (all merchandise)	583,200
	Note payable (due 12/31/2019	393,000

	Actual sales for the months of October and November were 20,000 and 30,000 units, respectively. Projected unit sales for December and January are 50,000 and 40,000, respectively. Experience indicates that 50% of sales should be collected in the month of sale, 30% in the month following sale, and the balance in the second month following sale. Uncollectible accounts, returns, and allowances are negligible.




	Planned purchases should provide ending inventories equal to 30% of next month's unit sales volume. Approximately 70% of the purchases are paid for in the month of purchase and the balance in the following month.



	Monthly operating expenses are budgested at $8.10 per unit sold plus a fixed amount of $189,000, including depreciation of $81,000. Except for depreciation, 60% of operating expenses are paid in the month incurred and the balance in the following month. Interest expense is included in operating expenses.



	Special anticipated year-end transactions include the following:
	1. Declaration of a $22,500 cash divided to be paid 2 weeks after the December 20 date of record.

	2. Sale of one-half of the marketable securities held on November 30; a gain of $21,000 is anticipated.

	3. Pay off the note payable due December 31, 2019.

	4. Trade-in of an old computer originally costing $675,000 and now having accumulated depreciation of $540,000 at a gain of $157,500 on a new computer costing $1,350,000. Sufficient cash will be paid at the time of trade-in-so that only 50% of the total price will have to be financed.



	5. Grove's treasurer has a policy of maintaining a minimum month-end cash balance of $135,000 but wants to raise this to $225,000 at December 31. She has a standing arrangement with the bank to borrow any amount up to a limit of $450,000.



	Required
	Prepare a cash budget for Grove, Inc., for December 2019.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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