Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
14th Edition
ISBN: 9780133507690
Author: Lawrence J. Gitman, Chad J. Zutter
Publisher: PEARSON
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Chapter 4, Problem 4.9P
Learning Goal 4
P4-10 Cash budget: Basic Grenoble Enterprises had sales of $50,000 in March and $60,000 in April
- 1. The firm makes 20% of sales for cash, 60% are collected in the next month, and the remaining 20% are collected in the second month following sale.
- 2. The firm receives other income of $2,000 per month.
- 3. The firm’s actual or expected purchases, all made for cash, are $50,000, $70,000, and $80,000 for the months of May through July, respectively.
- 4. Rent is $3,000 per month.
- 5. Wages and salaries are 10% of the previous month's sales.
- 6. Cash dividends of $3,000 will be paid in June.
- 7. Payment of principal and interest of $4,000 is due in June.
- 8. A cash purchase of equipment costing $6,000 is scheduled in July.
- 9. Taxes of $6,000 are due in June.
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QUESTION 4: CASH BUDGET
JL is preparing its cash budget for the next three quarters of the 2019 financial year. The following data have been
extracted from the operating budgets:
Quarter 1
Quarter 2
Quarter 3
R
R
R
Sales revenue
500 000
450 000
480 000
Direct material purchases
138 000
151 200
115 600
Additional information:
a) JL sells 20% of its goods for cash. It is estimated that 70% of all credit sales is received within the quarter in which
the sales are made; and 30% of all credit sales is received in the following quarter. It is estimated that trade
receivables will be R125 000 at the start of Quarter 1. No credit loss is anticipated.
b) All direct material purchases are made on credit. It is estimated that 50% of all direct material purchases are paid in
the quarter of purchase; the remaining 50% is paid in the quarter following the quarter of purchase. It is estimated
that the amount owning for direct material purchases will be R60 000 at the beginning of Quarter 1.
c) JL…
Preparing a financial budget—schedule of cash receipts and schedule of cash payments</b></p><p>Agua Cool is a distributor of bottled water. For each of the items, compute the number of cash receipts or payments Agua Cool will budget for September. The solution to one item may depend on the answer to an earlier item.
Management expects to sell equipment that cost $14,000 at a gain of $7,000. Accumulated depreciation on this equipment is $55,000.
Management expects to sell 7,100 cases of water in August and 9,000 cases in September. Each case sells for $14. Cash sales average 20% of total sales, and credit sales make up the rest. Three-fourths of credit sales are collected in the month of the sale, with the balance collected the following month.
The company pays rent and property taxes of $4,500 each month. Commissions and other selling expenses average 30% of sales. Agua Cool pays one—half of the commissions and other selling expenses in the month incurred, with the…
Preparing the financial budget—cash budget
Use the original schedule of cash receipts completed in Exercise E22—26, Requirement 1, and the schedule of cash payments completed in Exercise E22-27 to complete a cash budget for Marcel Company for January, February, and March.
Additional information: Marcel’s beginning cash balance is $5,000, and Marcel desires to maintain a minimum ending cash balance of $5,000. Marcel borrows cash as needed at the beginning of each month in increments of $1,000 and repays the amounts borrowed in increments of $1,000 at the beginning of months when excess cash is available. The interest rate on amounts borrowed is 8% per year. Interest is paid at the beginning of the month on the outstanding balance from the previous month.
Note: Exercises E22-26 and E22-27 must be completed before attempting Exercise E22-28.
Chapter 4 Solutions
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
Ch. 4.1 - Briefly describe the first four modified...Ch. 4.1 - Describe the overall cash flow through the firm in...Ch. 4.1 - Prob. 4.3RQCh. 4.1 - 4-B Why is depreciation (as well as amortization...Ch. 4.1 - Prob. 4.5RQCh. 4.1 - Prob. 4.6RQCh. 4.1 - Prob. 4.7RQCh. 4.2 - Prob. 4.8RQCh. 4.2 - Prob. 4.9RQCh. 4.3 - Prob. 4.10RQ
Ch. 4.3 - Prob. 4.11RQCh. 4.3 - Prob. 4.12RQCh. 4.3 - What is the cause of uncertainty in the cash...Ch. 4.4 - Prob. 4.14RQCh. 4.5 - Prob. 4.15RQCh. 4.5 - Prob. 4.16RQCh. 4.6 - Prob. 4.17RQCh. 4.6 - What is the significance of the plug figure,...Ch. 4.7 - Prob. 4.19RQCh. 4.7 - Prob. 4.20RQCh. 4 - Opener-in-Review The chapter opener described a...Ch. 4 - Learning Goals 2, 3 ST4-1 Depreciation and cash...Ch. 4 - Prob. 4.2STPCh. 4 - Prob. 4.3STPCh. 4 - Prob. 4.1WUECh. 4 - Prob. 4.2WUECh. 4 - Learning Goal 3 E4-3 Determine the operating cash...Ch. 4 - Prob. 4.4WUECh. 4 - Prob. 4.5WUECh. 4 - Prob. 4.1PCh. 4 - Prob. 4.2PCh. 4 - Prob. 4.3PCh. 4 - Learning Goals 2, 3 P4-4 Depreciation and...Ch. 4 - Learning Goal 3 P4-5 Classifying inflows and...Ch. 4 - Prob. 4.6PCh. 4 - Learning Goal 4 P4-8 Cash receipts A firm has...Ch. 4 - Learning Goal 4 P4-9 Cash disbursements schedule...Ch. 4 - Learning Goal 4 P4-10 Cash budget: Basic Grenoble...Ch. 4 - Prob. 4.10PCh. 4 - Prob. 4.11PCh. 4 - Prob. 4.12PCh. 4 - Prob. 4.13PCh. 4 - Learning Goal 4 P4-15 Multiple cash budgets:...Ch. 4 - Prob. 4.15PCh. 4 - Prob. 4.16PCh. 4 - Prob. 4.17PCh. 4 - Prob. 4.18PCh. 4 - Prob. 4.19PCh. 4 - Prob. 4.20PCh. 4 - Prob. 4.21PCh. 4 - Prob. 1SE
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