Solve accounting relating problems; 1 a

Qatar University

College of Business and Economics

Department of Accounting and Information System

Management Accounting — ACCT 116

Group Project - Spring 2013

SUBMISSION DEADLINE: THURSDAY 23 MAY 2013

Student Learning Outcomes:

1. Solve accounting relating problems; and

2. Work effectively in teams.

A&A Corporation

A&A Corporation, a rapidly expanding specialist photocopier manufacturer, is in the process of formulating plans for next year. The director of marketing has completed her sales budget and is confident that sales estimates will be met or exceeded. The following budgeted sales figures show the growth expected and will provide the planning basis for other corporate departments.

Budgeted sales in $	Budgeted sales in $
January	1 800 000	July	3 000 000
February	2 000 000	August	3 000 000
March	1 800 000	September	3 200 000
April	2 200 000	October	3 200 000
May	2 500 000	November	3 000 000
June	2 800 000	December	3 400 000

You, as a group of 4 students acting as FOUR assistant chief accountants, have been given the responsibility for formulating the cash budget, a critical element during a period of rapid expansion. The following information provided by operating managers will be used in preparing the cash budget:

1. A&A Corporation has experienced an excellent record in debtors’ collection and expects this trend to continue. 60% of billings are collected in the month after the sale and 40% in the second month after the sale. Uncollectable accounts are negligible and will not be considered in this analysis.

2. The purchase of raw materials is A&A’s largest expenditure; the cost of these items equals 50% of sales. Prior experience shows that 80% of creditors are paid by A&A one month after receipt of the purchased materials, and the remaining 20% are paid the second month after receipt.

3. Hourly wages depend on sales volume and are equal to 20% of the current month’s sales. These wages are paid in the month incurred.

4. General and administrative expenses are budgeted to be $2 640 000 for the year. The composition of these expenses is given below. All of these expenses are incurred evenly throughout the year except the property taxes. Property taxes are paid in four equal instalments in the last month of each quarter.

Salaries	$480 000
Promotion	$660 000
Property taxes	$240 000
Insurance	$360 000
Utilities	$300 000
Depreciation	$600 000

1. Corporation tax payments are made by A&A in the first month of each quarter based on the profit for the prior quarter. A&A’s tax rate is 40%. A&A’s net profit for the first quarter is projected to be $612 000.

1. Equipment and warehouse facilities are being acquired to support the company’s rapidly growing sales. Purchases of equipment and facilities are budgeted at $28 000 for April and $324 000 for May.

1. A&A has a corporate policy of maintaining an end-of-month cash balance of $100 000. Cash is borrowed or invested monthly, as needed, to maintain this balance. Interest expense on borrowed funds is budgeted at $8 000 for the second quarter, all of which will be paid during June.

Required (MIND THE WEIGHT OF EACH REQUIREMENT):

1. Using an excel sheet that shows the relevant formulas; prepare a schedule of cash collections for A&A Corporation by month and in total only for the second quarter. (THIS QUESTION WEIGHS 20%)

1. Using an excel sheet that shows the relevant formulas; prepare a schedule of cash payments for A&A Corporation by month and in total only for the second quarter. (THIS QUESTION WEIGHS 20%)

1. Using an excel sheet that shows the relevant formulas; prepare a cash budget for A&A Corporation by month and in total only for the second quarter. Be sure that all receipts, disbursements and borrowing investing amounts are shown for each month. (THIS QUESTION WEIGHS 40%)

4. Discuss why cash budgeting is particularly important for a rapidly expanding company such as A&A Corporation. (THIS QUESTION WEIGHS 20%)

IMPORTANT REMARKS

Submission deadline is Thursday 23^rd May 2013. Each member (student) shouldjoin a group on the blackboard until forming a group of maximum 4 members. When submitting your final project report you MUST state your group number that joined on the blackboard. It is assumed and expected that each member of the group should do a fair share of the work. The report is a joint responsibility, and each member is responsible for numerical accuracy, presentation, and standard of writing: marks awarded for the report will be the same for ALL members. If there are problemswithin the group which you cannot resolve, please discuss with your instructor. If the problems are not resolved and it is felt there has been an unequal contribution, then, exceptionally,you should inform your instructor of the proportion of the work whichhas been contributed by each member.

2

Academic integrity

You should use your own words, not quote phrases from textbooks and lecture handouts. It is expected that you will use textbooks to obtain an understanding of Budgeting. If you use textbooks as the source of ideas for your report, you must provide a reference. Not to do so would be plagiarism – a breach of re gulations withserious penalties.

Submission of report

ALL FOUR MEMBERS should submit the project online by the due date; Thursday 23^rd May 2013.Each submitted project report should include a front pagestating your group number on the blackboard and the full names and student ID numbers of all the members who joined you. Please note that no extension to this date is permitted, so make sure you plan your time so there is no last minute rush. Assignments submitted after this date will not be marked. However, if you experienced a serious and unforeseeable problem which prevented you submitting your work on time, you should consult the instructor.