Managerial Accounting - Profit Planning

1. Jordan Company expects to begin operations on January 1, 2009; it will operate as a specialty sales company that sells laser pointers over the Internet. Jordan expects sales in January 2009 to total $120,000 and to increase 10 percent per month in February and March. All sales are on account. Jordan expects to collect 70 percent of accounts receivable in the month of sale, 20 percent in the month following the sale, and 10 percent in the second month following the sale.

Required
a. Prepare a sales budget for the first quarter of 2009.
b. Determine the amount of sales revenue Jordan will report on the first 2009 quarterly budgeted income statement.
c. Prepare a cash receipts schedule for the first quarter of 2009.
d. Determine the amount of accounts receivable as of March 31, 2009.

2. Banana, Inc., sells fireworks. The company's marketing director developed the following cost of goods sold budget for April, May, June, and July.

April May June July
Budgeted cost of goods sold $70,000 $80,000 $90,000 $76,000

Banana had a beginning inventory balance of $3,500 on April 1 and a beginning balance in accounts payable of $15,100. The company desires to maintain an ending inventory balance equal to 10 percent of the next period's cost of goods sold. Banana makes all purchases on account. The company pays 50 percent of accounts payable in the month of purchase and the remaining 50 percent in the month following purchase.

Required
a. Prepare an inventory purchase budget for April, May, and June.
b. Determine the amount of ending inventory Banana will report on the end-of-quarter budgeted balance sheet.
c. Prepare a schedule of cash payments for inventory for April, May, and June.
d. Determine the balance in accounts payable Banana will report on the end-of-quarter budgeted balance sheet.

3. Gibson Medical Clinic has budgeted the following cash flows.

January February March
Cash receipts $101,000 $108,000 $125,000
Cash payments
For inventory purchases 92,000 72,000 83,000
For S&A expenses 30,000 32,000 26,000

Gibson Medical had a cash balance of $7,000 on January 1. The company desires to maintain a cash cushion of $5,000. Funds are assumed to be borrowed, in increments of $1,000, and repaid on the last day of each month; the interest rate is 1 percent per month. Repayments may be made in any amount available. Gibson pays its vendors on the last day of the month also. The company had a $30,000 beginning balance in its line of credit liability account.

Required
Prepare a cash budget. (Round all computations to the nearest whole dollar.)