Prepare a cash budget for june

Question 1 CH 13 - Budgetary Planning (15 mins)

Prepare cash budget for a month. The controller of Trenshaw Company wants to improve the company's control system by preparing a month-by-month cash budget. The following information is for the month ending July 31, 2017.

June 30, 2017, cash balance $45,000 Dividends to be declared on July 15* 12,000 Cash expenditures to be paid in July for operating expenses 40,800

Amortization expense in July 4,500 Cash collections to be received in July 90,000

Merchandise purchases to be paid in cash in July 56,200

Equipment to be purchased for cash in July 20,000

* Dividends are payable 30 days after declaration to shareholders of record on the declaration date. Trenshaw Company wants to keep a minimum cash balance of $25,000. Instructions (a) Prepare a cash budget for the month ended July 31, 2017, and indicate how much money, if any, Trenshaw Company will need to borrow to meet its minimum cash requirement. (b) Explain how cash budgeting can reduce the cost of short-term borrowing.

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Question 2 CH 14 – Budgetary Control and Responsibility Accounting (25 mins)

Prepare a responsibility report for an investment center. The Dinkle and Frizell Dental Clinic provides both preventive and orthodontic dental services. The two owners, Reese Dinkle and Anita Frizell, operate the clinic as two separate investment centers: Preventive Services and Orthodontic Services. Each of them is in charge of one of the centers: Reese for Preventive Services and Anita for Orthodontic Services. Each month, they prepare an income statement for the two centers to evaluate performance and make decisions about how to improve the operational efficiency and profitability of the clinic. Recently, they have been concerned about the profitability of the Preventive Services operations. For several months, it has been reporting a loss. The responsibility report for the month of May 2017 is shown below.

Actual

Difference from

Budget Service revenue $ 40,000 $1,000 F Variable costs

Filling materials 5,000 100 U Novocain 3,900 100 U Supplies 1,900 350 F Dental assistant wages 2,500 –0– Utilities 500 110 U Total variable costs 13,800 40 F Fixed costs

Allocated portion of receptionist's salary 3,000 200 U Dentist salary 9,800 400 U Equipment depreciation 6,000 –0– Allocated portion of building depreciation 15,000 1,000 U Total fixed costs 33,800 1,600 U Operating income (loss) $ (7,600) $ 560 U

In addition, the owners know that the investment in operating assets at the beginning of the month was $82,400, and it was $77,600 at the end of the month. They have asked for your assistance in evaluating their current performance reporting system. Instructions (a) Prepare a responsibility report for an investment center as illustrated in the chapter. (b) Write a memo to the owners discussing the deficiencies of their current reporting system.

Question 3 CH 15 - Standard Costs and Balanced Scorecard (30 mins)

Compute variances, and prepare income statement.

Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2017.

Costs and Production Data Actual Standard Raw materials unit cost $2.25 $2.10 Raw materials units used 10,600 10,000 Direct labor payroll $120,960 $120,000 Direct labor hours worked 14,400 15,000 Manufacturing overhead incurred $189,500

Manufacturing overhead applied

$193,500 Machine hours expected to be used at normal capacity

42,500

Budgeted fixed overhead for June

$55,250 Variable overhead rate per machine hour

$3.00

Fixed overhead rate per machine hour

$1.30

Overhead is applied on the basis of standard machine hours. Three hours of machine time are required for each direct labor hour. The jobs were sold for $400,000. Selling and administrative expenses were $40,000. Assume that the amount of raw materials purchased equaled the amount used. Instructions (a) Compute all of the variances for (1) direct materials and (2) direct labor. (b) Compute the total overhead variance. (c) Prepare an income statement for management. (Ignore income taxes.)

Question 4 CH 16 - Planning for Capital Investments (20 mins)

Calculate payback, annual rate of return, and net present value.

Drake Corporation is reviewing an investment proposal. The initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year is equal to its book value. There would be no salvage value at the end of the investment's life.

Investment Proposal

Year Initial Cost and Book Value

Annual Cash Flows

Annual Net Income

0 $105,000

1 70,000 $45,000 $10,000 2 42,000 40,000 12,000 3 21,000 35,000 14,000 4 7,000 30,000 16,000 5 0 25,000 18,000

Drake Corporation uses an 11% required rate of return for new investment proposals. Instructions (a) What is the cash payback period for this proposal? (b) What is the annual rate of return for the investment? (c) What is the net present value of the investment?

Instructions
Instructions
Instructions