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1. Diamond Inc., a distributor of jewelry throughout the Philippines, is in the process of assembling a
cash budget for the first quarter of 2010. The following information has been extracted from the
company’s accounting records:
• All sales are on account. 60% of customer accounts are collected in the month of sale. 35%
are collected in the following month. Uncollectible accounts amounting to 5% are
anticipated, and management believes that only 20% of the outstanding accounts on
December 31, 2009 will be recovered and the recovery will be in January 2010. In
estimating doubtful accounts, Diamond uses the allowance method.
• 70% of the merchandise purchased is paid in the month of purchase. The balance is paid in
the month after the month of purchase.
• The December 31, 2009 balance sheet disclosed the following selected figures: Cash –
P60,000; Accounts Receivable – P165,000; Accounts Payable – P66,000.
• The company maintains a P60,000 minimum cash balance at all times. Financing is
available at an 8% interest rate, with borrowings taking place at the beginning of the month
and repayments occurring at the end of the month. Interest is paid at the time of repaying
the principal and computed on the portion of principal repaid at that time.
• Additional data:
Required: a. Prepare a schedule that shows the firm’s total cash collections for January to March.
b. Prepare a schedule that shows the firm’s total cash disbursements for January to March.
c. Prepare a schedule that shows the firm’s cash needs, if any. The schedule should also
disclose the ending cash balance for each month.
2. Pepeng Corporation manufactures two different types of coils used in electric motors. The
controller compiled the following data:
• Manufacturing Overhead:
Required: Based on the data provided compute the following for the year 2010:
3. Polgas Merchandiser asks your services to develop cash and other budget information for the first
quarter of 2010. On December 31, 2009, the store had the following selected account balances:
Cash P 55,000
Accounts Receivable 4,370,000
Inventories 3,094,000
Accounts Payable 1,330,500
Sales:
• Each month’s sales are billed on the last day of the month.
• Customers are allowed a 3% discount if payment is made within 10 days after the billing
date. Receivables are booked at gross.
• 60% of the billings are collected within the discount period, 25% are collected by the end
of the month, 9% are collected by the end of the second month and the balance is considered
uncollectible.
4. Weldon Industrial Gas Corporation supplies acetylene and other compressed gases to
industry. Data regarding the store's operations follow:
•Sales (all on account) are budgeted at P360,000 for November 2010, P380,000 for
December 2010, and P350,000 for January 2011.
• Collections are expected to be 75% in the month of sale, 20% in the month
following the sale, and 5% uncollectible. Weldon uses the allowance method for
estimating doubtful accounts.
• The gross profit rate based on sales is 35%.
• The company purchases 60% of its merchandise in the month prior to the month
of sale and 40% in the month of sale. Payment for merchandise is made in the month
following the purchase.
• Ignore taxes.
Required:
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