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chapter 4 / problem 1se Chapter 4, Problem 1SE (4 Bookmarks) Show all steps:
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You have been assigned the task of putting together a statement for the ACME Company that
shows its expected inflows and outflows of cash over the months of July 2016 through December
CONTINUE TO POST
2016.
20 questions remaining
You have been given the following data for ACME Company:
(1) Expected gross sales for May through December, respectively, are $300,000, $290,000,
$425,000, $500,000, $600,000, $625,000, $650,000, and $700,000.
(2) 12% of the sales in any given month are collected during that month. However, the firm has a My Textbook Solutions
credit policy of 3/10 net 30, so factor a 3% discount into the current month’s sales collection.
(3) 75% of the sales in any given month are collected during the following month after the sale.
(4) 13% of the sales in any given month are collected during the second month following the Add a
sale. textboo
(5) The expected purchases of raw materials in any given month are based on 60% of the Principles of Study Guide
Managerial... for...
expected sales during the following month. 7th Edition 13th Edition
(6) The firm pays 100% of its current month’s raw materials purchases in the following month. View all solutions
(7) Wages and salaries are paid on a monthly basis and are based on 6% of the current month’s
expected sales.
(8) Monthly lease payments are 2% of the current month’s expected sales.
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(9) The monthly advertising expense amounts to 3% of sales. right now
(10) R&D expenditures are expected to be allocated to August, September, and October at the
rate of 12% of sales in those months. Madhur
IIT roorkee 89
(11) During December a prepayment of insurance for the following year will be made in the
amount of $24,000.
Pavel
Southern Methodis… 993
(12) During the months of July through December, the firm expects to have miscellaneous
expenditures of $15,000, $20,000, $25,000, $30,000, $35,000, and $40,000, respectively.
(13) Taxes will be paid in September in the amount of $40,000 and in December in the amount of Bon x
Masinde Muliro Un… 283
$45,000.
(14) The beginning cash balance in July is $15,000.

FIND ME A TUTOR
(15) The target cash balance is $15,000.
TO DO
a. Prepare a cash budget for July 2016 through December 2016 by creating a combined
spreadsheet that incorporates spreadsheets similar to those in Tables 4.8, 4.9, and 4.10. Divide
your spreadsheet into three sections:
(1) Total cash receipts
(2) Total cash disbursements
(3) Cash budget covering the period of July through December
The cash budget should reflect the following:
(1) Beginning and ending monthly cash balances
(2) The required total financing in each month required
(3) The excess cash balance in each month with excess
b. Based on your analysis, briefly describe the outlook for this company over the next 6 months.
Discuss its specific obligations and the funds available to meet them. What could the firm do in
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the case of a cash deficit? (Where could it get the money?) What should the firm do if it has a
cash surplus?
Chapter 4, Problem 1SE (4 Bookmarks) Show all steps:
Step-by-step solution
Step 1 of 27
Use the given financial information to prepare a cash budget for Company A for July 2016
through December 2016 by creating a spreadsheet.
Company A wishes to create a cash budget based on the given expected inflows and outflows of
cash over the months of July 2016 to December 2016.
A cash budget is a statement of a company’s planned inflows and outflows of cash. The total
cash receipts include a company’s inflows of cash. The total cash disbursements include a
company’s outflows of cash. The net cash flow of a company is calculated by subtracting the
total cash disbursements from the total cash receipts.
Comment
Step 2 of 27
Prepare a cash budget for Company A by creating a spreadsheet that includes the total cash
receipts, total cash disbursements and cash budget.
First, calculate the total cash receipts from July 2016 to December 2016 to indicate the inflows of
cash to the company.
The total cash receipts are calculated by subtracting discounts and adding the collections of
accounts receivable to cash sales for each month.
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Comment
Step 3 of 27
Create a schedule of project cash receipts to determine the total cash receipts for the company.
First, enter the given expected gross sales into a row of the spreadsheet for each corresponding
month from May through December, as shown below:
Comment
Step 4 of 27
Calculate the cash sales for each month, which is 12% of gross sales of that given month. Enter
the given percentage of 12% in cell C5. Calculate the cash sales for May by multiplying the
percentage by the monthly gross sales, by entering the following formula in cell D5:
Copy the formula in cell D5 down the row to calculate the cash sales for the remaining months.
The spreadsheet displaying the information is shown below:
Comment
Step 5 of 27
Calculate the discount for each month, which is 3% of cash sales of that given month. Enter the
given percentage of 3% in cell C6. Calculate the discounts for May by multiplying the percentage
by the monthly cash sales, by entering the following formula in cell D6:
Copy the formula in cell D6 down the row to calculate the discounts for the remaining months.
The spreadsheet displaying the information is shown below:
Comment
Step 6 of 27
Calculate the collections of accounts receivable for each month. 75% of gross sales is collected
in the month following the month of sales and 13% of gross sales is collected two months
following the month of sales. Enter the given percentage of 75% in cell C8 and 13% in cell C9.
Calculate the collections lagged by one month for June by multiplying the percentage by the
monthly gross sales, by entering the following formula in cell E8:
Copy the formula in cell E8, down the row to calculate the collections of accounts receivable for
the remaining months.
CommentChapter 4, Problem 1SE (4 Bookmarks) Show all steps:
Step 7 of 27
Calculate the collections lagged by two months for July by multiplying the percentage by the
monthly gross sales, by entering the following formula in cell F9:
Copy the formula in cell F9 down the row to calculate the collections of accounts receivable for
the remaining months. The spreadsheet displaying the information is shown below:
Comment
Step 8 of 27
Calculate the total cash receipts for each month by subtracting the discounts and adding the
collections of accounts receivable to cash sales for each month.
Enter the following formula into cell D10 to calculate the total cash receipts for May:
Copy the formula in cell D10 down the row to calculate the total cash receipts for the remaining
months. The spreadsheet displaying the information is shown below:
Comment
Step 9 of 27
Next, calculate the total cash disbursements by calculating the sum of all given outflows of cash.
This exercise has stated that the company will have the following cash disbursements: payments
of accounts payable, wages & salaries, lease payments, advertising expenses, R&D
Chapter 4, Problem Show all steps:
insurance,1SE
(4 Bookmarks)
expenditures, prepaid miscellaneous expenditures, and taxes.
Comment
Step 10 of 27
Calculate the purchases forecast for each month, which is 60% of expected gross sales of the
following month. Enter the given percentage of 60% in cell C12. Calculate the expected
purchases for May by multiplying the percentage by the monthly expected gross sales for the
following month, by entering the following formula in cell D12:
Copy the formula in cell D12 down the row to calculate the purchases forecast for the remaining
months. The spreadsheet is shown below:
Comment
Step 11 of 27
Calculate the payments for the month’s material purchases. 100% of the month’s purchases is
paid in the following month. Enter the given percentage of 100% in cell C15. Calculate the
payments lagged by one month for June by multiplying the percentage by the monthly purchases
forecast, by entering the following formula in cell E15:
Copy the formula in cell E15 down the row to calculate the collections of accounts payable for the
remaining months. The spreadsheet displaying the information is shown below:
Calculate the wages and salaries for each month, which is 6% of expected cash sales of that
given month. Enter the given percentage of 6% in cell C16. Calculate the wages and salaries for
May by multiplying the percentage by the monthly cash sales, by entering the following formula in
cell D16:
Copy the formula in cell D16 down the row to calculate the wages and salaries for the remaining
Comment
Step 12 of 27
Calculate the lease payments for each month, which is 2% of expected cash sales of that given
month. Enter the given percentage of 2% in cell C17. Calculate the lease payments for May by
multiplying the percentage by the monthly cash sales, by entering the following formula in cell
D17:
Copy the formula in cell D17 down the row to calculate the lease payments for the remaining
Comment
Step 13 of 27
Calculate the advertising expense for each month, which is 3% of expected cash sales of that
given month. Enter the given percentage of 3% in cell C18. Calculate the advertising expense for
May by multiplying the percentage by the monthly cash sales, by entering the following formula in
cell D18:
Copy the formula in cell D18 down the row to calculate the advertising expense for the remaining
Comment
Step 14 of 27
Calculate the R&D expenditures for each month, which is 12% of expected cash sales of August,
September, and October. Enter the given percentage of 12% in cell C19. Calculate the R&D
expenditures for August by multiplying the percentage by the monthly cash sales, by entering the
following formula in cell G19:
Copy the formula in cell G19, down the row to cell I19 to calculate the R&D expenditures for the
designated months. The spreadsheet displaying the information is shown below:
Comment
Step 15 of 27
The prepaid insurance is paid in December in a payment of $24,000. Enter $24 in cell K20 to
indicate the prepaid insurance payment in December. The spreadsheet displaying the
information is shown below:
Comment
Step 16 of 27
Enter the given miscellaneous expenditures for July through December. Enter $15, $20, $25,
$30, $35, and $40 in cells F21:K21, respectively. The spreadsheet displaying is shown below:
Comment
Step 17 of 27
The taxes are paid in September and December in the amounts of $40,000 and $45,000,
respectively. Enter $40 in cell H22 and $45 in cell K22 to indicate the tax payments in September
and December. The spreadsheet displaying the information is shown below:
Calculate the total cash disbursements for each month by finding the sum of the payments of
accounts payable, wages & salaries, lease payments, advertising expenses, R&D expenditures,
prepaid insurance, miscellaneous expenditures, and taxes.
Enter the Chapter

following formula into cell
4, Problem 1SE D23 to calculate the total cash (4
disbursements
Bookmarks) forShow
May: all steps:
Copy the formula in cell D22 down the row to calculate the total cash disbursements for the
Comment
Step 18 of 27
Next, prepare the cash budget section by calculating the net cash flow from subtracting the total
cash disbursements from the total cash receipts. Given that the beginning cash balance is
$15,000 for July, add the beginning cash balance for July to the net cash flow for July to find the
ending cash balance for July. The ending cash balance for each month is the beginning cash
balance for the following month. The ending balance for each month is the sum of the month’s
net cash flow and month’s beginning balance.
Comment
Step 19 of 27
Calculate the net cash flow by copying the total cash receipts to cells F29:K29. Copy the total
cash disbursements to cells F30:K30. Calculate the net cash flow by subtracting the total cash
disbursements from the total cash receipts, by entering the following formula in cell F31:
Copy the formula in cell F31 down the row to calculate the net cash flow for the remaining
Comment
Chapter 4, Problem 1SE Step 20 of 27 (4 Bookmarks) Show all steps:
Input the beginning cash balance for July by entering $15 in cell F32. Calculate the ending cash
balance by adding the beginning cash balance to the net cash flow, by entering the following
formula in cell F33:
Copy the formula in cell F33 down the row to calculate the ending cash balance for the remaining
months.
Comment
Step 21 of 27
Also, copy the ending cash balance from July to the beginning cash balance of the following
month by entering the following formula in cell G32:
Copy the formula in cell G32 down the row to calculate the beginning cash balance for the
Comment
Step 22 of 27
The minimum cash balance for each month is given as $15,000. Enter $15 in cells F34:K34 to
indicate the minimum cash balance for each month.
Comment
Step 23 of 27
Next, subtract the minimum cash balance from the ending cash to determine if either financing is
required or if excess cash balance exists each month. If the ending cash in less than the
minimum cash balance, then financing is required. If the ending cash in greater than the
minimum cash balance, then excess cash exists.
Comment
Step 24 of 27
Use an IF statement to calculate amount of financing required for the months where the ending
cash balance is less4,than
Chapter the minimum
Problem 1SE cash balance. Enter the following Show
formula in cell
(4 Bookmarks) F35alltosteps:
calculate the total financing required for each month, if applicable:
The IF formula first determines if the ending cash balance is less than the minimum cash
balance. If this is true, the total financing required is calculated by subtracting the ending cash
from the minimum cash balance. Otherwise, the cell is left blank.
Copy the formula in cell F35 down the row to calculate the required total financing for the
Comment
Step 25 of 27
Comment
Step 26 of 27
Use an IF statement to calculate amount of excess cash for the months where the ending cash
balance is greater than the minimum cash balance. Enter the following formula in cell F36 to
calculate the excess cash balance for each month, if applicable:
The IF formula first determines if the ending cash balance is greater than the minimum cash
balance. If this is true, the excess cash balance is calculated by subtracting the minimum cash
balance from the ending cash balance. Otherwise, the cell is left blank.
Copy the formula in cell F36, down the row to calculate the excess cash balance for the
Comment
Step 27 of 27
Upon analysis of the cash budget, an excess cash balance exists in November and December.
The cash budget projects that Company A will have to borrow funds, up to $94,000 in September
over the next 6 months.
Comment
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Principles of Managerial Finance, Brief Plus NEW MyFinanceLab with

(14) The beginning cash balance in July is $15,000.

(1) Total cash receipts

(2) Total cash disbursements

(3) Cash budget covering the period of July through December

The cash budget should reflect the following:

(1) Beginning and ending monthly cash balances

(2) The required total financing in each month required

(3) The excess cash balance in each month with excess

Chapter 4, Problem 1SE (4 Bookmarks) Show all steps:

CommentChapter 4, Problem 1SE (4 Bookmarks) Show all steps:

Chapter 4, Problem 1SE (4 Bookmarks) Show all steps:

Chapter 4, Problem 1SE (4 Bookmarks) Show all steps:

Enter the Chapter

Chapter 4, Problem 1SE Step 20 of 27 (4 Bookmarks) Show all steps:

Chapter 4, Problem 1SE (4 Bookmarks) Show all steps:

Was this solution helpful? 0 0

Recommended solutions for you in Chapter 4

View this solution View this solution

Chapter 4, Problem 1SE (4 Bookmarks) Show all steps:

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