Janus Products Inc is a merchandising company that sells bin

Janus Products, Inc. is a merchandising company that sells binders, paper, and other school supplies. The company is planning its cash needs for the third quarter. In the past, Janus Products has had to borrow money during the third quarter to support peak sales of back-to-school materials, which occur during August. The following information has been assembled to assist in preparing a cash budget for the quarter:

Janus Products, Inc. is a merchandising company that sells binders, paper, and other school supplies. The company is planning its cash needs for the third quarter. In the past, Janus Products has had to borrow money during the third quarter to support peak sales of back-to-school materials, which occur during August. The following information has been assembled to assist in preparing a cash budget for the quarter:

Janus Products, Inc. is a merchandising company that sells binders, paper, and other school supplies. The company is planning its cash needs for the third quarter. In the past, Janus Products has had to borrow money during the third quarter to support peak sales of back-to-school materials, which occur during August. The following information has been assembled to assist in preparing a cash budget for the quarter: a. Budgeted monthly absorption costing income statements for July to October are as follows AugustSeptember October $56,000 32,400 Sales $46,000 26,400 $76,000 44 400 $51 000 29,400 Cost of goods sold Gross margin Selling and administrative expenses 19,600 31 ,600 23,600 21,600 Selling expense Administrative expense 7 900 9,000 5,950 12,900 9,100 6,700 7800 20,700 4,650 %10,900 7,800 6,500 14,400 7200 Total selling and administrative expenses 14,950 15,800 Net operating income \"Includes $2300 depreciation each month b. Sales are 20% for cash and 80% on credit C. Credit sales are collected over a three-month period, with 10% collected in the month of sale, 70% in the month following sale, and 20% in the second month following sale. May sales totalled $36,000, and June sales totalled $42,000 d. Inventory purchases are paid for within 15 days. Therefore, 50% of a month\'s inventory purchases are paid for in the month of purchase. The remaining 50% are paid in the following month. Accounts payable for inventory purchases at June 30 total $14,700 e. The company maintains its ending inventory levels at 75% of the cost of the merchandise to be sold in the following month. The merchandise inventory at June 30 is $21,000 f Land costing $4 800 will be purchased in July g. Dividnds of $1 ,300 will be declared and paid in September h. The cash balance on June 30 is $8,500; the company must maintain a cash balance of at least this amount at the end of each month i. The company has an agreement with a local bank that allows it to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $40,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter Required: 1. Prepare a schedule of expected cash collections for July, August, and September and for the quarter in tota JANUS PRODUCTS, INC Schedule of Expected Cash Collections August September uarter Cash sales $ 9,200 1520011200 35 600 Credit sales 7 200

Solution

Answer 1. Sales Budget Jul Aug Sep Quarter Oct. May June Sales                46,000                76,000                 56,000              178,000          51,000          36,000          42,000 Cash Sales - 20% of Sales                  9,200                15,200                 11,200                35,600          10,200            7,200            8,400 Credit Sales - 80% of Sales                36,800                60,800                 44,800              142,400          40,800          28,800          33,600 JANUS PRODUCTS INC Schedule of Expected Cash Collections Jul Aug Sep Quarter Cash Sales                  9,200                15,200                 11,200                35,600 Credit Sales: May                  5,760                   5,760 June                23,520                   6,720                          -                  30,240 Jul                  3,680                25,760                   7,360                36,800 Aug                   6,080                 42,560                48,640 Sep                   4,480                   4,480 Total cash Collections                42,160                53,760                 65,600              161,520 Answer 2-a. JANUS PRODUCTS INC Merchandise Purchase Budget Jul Aug Sep Quarter Oct Budgeted Cost of Goods Sold                26,400                44,400                 32,400              103,200          29,400 Add: Desired Ending Inventory                33,300                24,300                 22,050                22,050 Total Needs                59,700                68,700                 54,450              125,250 Less: Beginning Inventory              (21,000)              (33,300)              (24,300)              (21,000) Required Inventory Purchases                38,700                35,400                 30,150              104,250 Answer 2-b. JANUS PRODUCTS INC Schedule of Expected Cash Disbursements Jul Aug Sep Quarter Cash Payment Accounts Payable - June 30                14,700                14,700 Jul Purchases                19,350                19,350                38,700 Aug Purchases                17,700                 17,700                35,400 Sep Purchases                 15,075                15,075 Total Cash Payment to Suppliers                34,050                37,050                 32,775              103,875 Answer 3. Cash budget Jul Aug Sep Quarter Cash Balance, beginning                  8,600                   9,260                   9,570                   8,600 Add: Collection from Sales                42,160                53,760                 65,600              161,520 Total Cash available                50,760                63,020                 75,170              170,120 Less: Disbursements Inventory Purchases                34,050                37,050                 32,775              103,875 Land                  4,800                          -                            -                     4,800 Dividends                         -                            -                     1,300                   1,300 Selling Expenses                  9,000                12,900                   9,100                31,000 Administrative Expenses                  3,650                   5,500                   4,400                13,550 Total Disbursement                51,500                55,450                 47,575              154,525 Excess (Deficiency) of Cash available over disbursements                    (740)                   7,570                 27,595                15,595 Financing: Borrowings                10,000                   2,000                12,000 Repayments                         -                            -                (12,000)              (12,000) Interest                         -                            -                      (340)                    (340) Total Financing                10,000                   2,000              (12,340)                    (340) Cash Balance, Ending                  9,260                   9,570                 15,255                15,255