ACCT 406 Wk2 Q8

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American Military University *

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406

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Accounting

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Jun 27, 2024

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3 0/10 points awarded Dimsdale Sports, a merchandising company, reports the following balance sheet at December 31. DIMSDALE SPORTS COMPANY Balance Sheet December 31 Assets Cash $ 36,000 Accounts receivable 525,000 o Inv?ntory 150,000 Equipment $ 540,000 References Less: Accumulated depreciation 67,500 472,500 Total assets $1,183,500 Liabilities and Equity Liabilities Accounts payable $ 360,000 Loan payable 15,000 Taxes payable (due March 15) 90,000 $ 465,000 Equity Common stock $ 472,500 Retained earnings 246,000 718,500 Total liabilities and equity $ 1,183,500 To prepare a master budget for January, February, and March, use the following information. a. The company’s single product is purchased for $30 per unit and resold for $55 per unit. The inventory level of 5,000 units on December 31is more than management's desired level, which is 20% of the next month’s budgeted sales units. Budgeted sales are January, 7,000 units; February, 9,000 units; March, 11,000 units; and April, 10,000 units. All sales are on credit. b. Cash receipts from sales are budgeted as follows: January, $221,250; February, $697,000; March, $489,500. ¢. Cash payments for merchandise purchases are budgeted as follows: January, $80,000; February, $302,800; March, $147,600. d. Sales commissions equal to 20% of sales dollars are paid each month. Sales salaries (excluding commissions) are $5,000 per month.

3 e. General and administrative salaries are $12,000 per month. Maintenance expense equals $2,000 per month and is paid in cash. f. New equipment purchases are budgeted as follows: January, $36,000; February, $96,000; and March, $28,800. Budgeted 0/10 depreciation expense is January, $6,000; February, $7,000; and March, $7,300. points awarded g. The company budgets a land purchase at the end of March at a cost of $150,000, which will be paid with cash on the last day of the month. @ h. The company has an agreement with its bank to obtain additional loans as needed. The interest rate is 1% per month and interest is paid at each month-end based on the beginning-month balance. Partial or full payments on these loans are made on the last day of the month. The company maintains a minimum ending cash balance of $25,000 at the end of each month. o i. The income tax rate for the company is 40%. Income taxes on the first quarter’'s income will not be paid until April 15. References Required: Prepare a master budget for the months of January, February, and March that has the following budgets: 1. Sales budget. 2. Merchandise purchases budgets. 3. Selling expense budgets. 4. General and administrative expense budgets. Hint: Depreciation is included in the general and administrative budget for merchandisers. 5. Capital expenditures budgets. 6. Cash budgets. 7. Budgeted income statement for entire quarter (not monthly) ended March 31. 8. Budgeted balance sheet as of March 31.

3 0/10 points awarded eBook References Complete this question by entering your answers in the tabs below. | — Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Required 8 Sales budgets. — p— DIMSDALE SPORTS Sales Budget January | February March l Totals Budgeted sales units 7,000 9,000 11,000 27,000 Selling price per unit 551 $ 55 55?5 55 Total budgeted sales $ 385,000 [ $ 495,000 ¥ $ 605,000 Li $ 1,485,000

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3 0/10 points awarded eBook References Complete this question by entering your answers in the tabs below. e b Required 2 -E Required 3 Required 4 Required 5 Required 6 Required 1 Required 7 Required 8 £ o I I Merchandise purchases budgets. DIMSDALE SPORTS B Merchandise Purchases Budget il B January February March Total ] Budgeted sales units v 7,000 9,000 11,000 Add: Desired ending inventory v Next period budgeted sales units 9,000 11,000 10,000 Ratio of inventory to future sales 20% 20% 20% Desired ending inventory units 1,800F 2,200 2,000 Total requird units 8,800 11,200 13,000 Less: Beginning inventory units v 5,000 1,800 2,200 Units to be purchased 3,800 9.400 10,800 24000 Cost per unit 30 g $ 30 by § 0% 30 Cost of merchandise purchases $ 114,000 h $ 282,000 E 324,000 E $ 720,000

3 0/10 points awarded eBook References Complete this question by entering your answers in the tabs below. Selling expense budgets. N - — DIMSDALE SPORTS IE Selling Expense Budget = ;__ January February March Total m Budgeted sales S 385,000 $ 495000 $ 605,000 Sales commission percent | v 20%E 20% 20% Sales commissions 77’000h 99,000 121,000 5 $ 297,000 Sales salaries v 5,000 5,000 5,000 15,000 otal selling expenses M F S 82,000E $ 104,000 15 $ 126,000 15 $ 312,000 Required 1 Required 2 % Required 3 Required 4 Required 5 Required 6 Required 7 Required 8

3 0/10 points awarded Complete this question by entering your answers in the tabs below. m Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Required 8 General and administrative expense budgets. Hint: Depreciation is included in the general and administrative budget for eBook merchandisers. References DIMSDALE SPORTS D General and Administrative Expense Budget N B January February | March | Total B General and administrative salaries [ $ 12,000 $ 12,000 $ 12,000h$ 36,000 aintenance v 2,000 2,000 2,000h 6,000 epreciation v 6,000 7,000 7,300 20,300 Total general and administrative expenses $ 20,000 ¥ $ 21,000 7| $ 21 :BOOES 62,300

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3 Complete this question by entering your answers in the tabs below. 010 points awarded m Required 1 Required 2 Required 3 Required 4 : Required 5 § Required 6 Required 7 Required 8 Capital expenditures budgets. eBook | DIMSDALE SPORTS References — — Capital Expenditures Budget January February March @ Total Equipment purchases $ 36,000f $ 96,000] $ 28,8001i $ 160,800 15o,oooh 150,000 &s 36,000 $ 96,000 |5 § 178,800z 310,800 Land purchase Total capital expenditures

Required 1 Required 2 Required 3 Required 4 Required 5 0/10 — Required 6 Required 7 Required 8 points awarded Cash budgets. @ Note: Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. DIMSDALE SPORTS COMPANY B Cash Budget bl AR — January February March — References Beginning cash balance $ 36,000f $ 30,100 210,300 Add: Cash receipts from sales | v 221,250 697,000 489,500 Total cash available B 257,250 B 727,100 699,800 Less: Cash payments for: Merchandise purchases v 80,000 302,800 147 600 Sales commissions v 77,000 99,000 121,000 Sales salaries - 5,000 5,000 5,000 General and administrative salaries v 12,000 12,000 12,000 Maintenance v 2,000 2,000 2,000 Loan interest v 150 Taxes - 90,000 Purchases of equipment v 36,000 96,000 28,800 Purchase of land v 150,000

3 Total cash payments 212,150 516,800 556,400 0/10 Preliminary cash balance 45,100 210,300 143,400 points awarded Additional loan (loan repayment) - (15,000) @ Ending cash balance $ 30,1 ooh $ 210,300 h $ 143,400 Loan balance — eBook | g January F February ' March b References Loan balance - Beginning of month $ 15,000h $ Oz $ 0 Additional loan (loan repayment) (15,000) Loan balance - End of month B $ OE $ 0z $ 0

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i} Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 % Required 7 i Required 8 0/10 i e points awarded Budgeted income statement for entire quarter (not monthly) ended March 31. @ | DIMSDALE SPORTS COMPANY Budgeted Income Statement — — eBook | For Three Months Ended March 31 PR Sales v $ 1,485,000 Cost of goods sold v 810,000 Gross profit v 675,000 Selling, general and administrative expenses Sales commissions expense [ $ 297,000 Sales salaries expense v 15,000 General administrative salaries expense v 36,000 Maintenance expense v 6,000 Depreciation expense v 20,300 Loan interest expense ~ 150 Total operating expenses 374,450 Income before income taxes v 300,550 Income taxes expense v 120,220 et income v ES 180,330

Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 } Required 8 010 | — il _______§ points awarded Budgeted balance sheet as of March 31. @ | DIMSDALE SPORTS COMPANY F Budgeted Balance Sheet il eBook | March 31 | References Assets Cash v $ 143,400 Accounts receivable v 602,250 Inventory v 60,000 Land v 150,000 Equipment v 700,800 Less: Accumulated depreciation v 87,800 & 613,000 Total assets @S 1,568,650 Liabilities and Equity Liabilities Accounts payable | $ 549,600 Taxes payable v 120,220 7 669,820 Equity Common stock v 472,500 Retained earnings v 426,330z 898,830

3 " Common stock ~[ 472,500| Retained earnings - 426,3305 898,830 010 Soints awarded | Total Liabilities and Equity @$ 1568650 [ scoea J | < Reaured7 eBook References Explanation 7. Cost of goods sold (27,000 units @ $30) = $810,000 Income taxes ($300,550 x 40%) = $120,220 g_ Cash Cash budget Accounts receivable Note A Inventory Note B Land Capital budget Equipment Note C Less: Accumulated depreciation Note D Accounts payable Note E Taxes payable Income statement

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010 points awarded eBook References e Accounts receivable Inventory Land Equipment Less: Accumulated depreciation Accounts payable Taxes payable Common stock Retained earnings Supporting Footnotes Note A Beginning accounts receivables Credit sales Less collections Ending accounts receivables Note B Beginning merchandise inventory Purchases Less cost of goods sold Ending merchandise inventory* AL M - Note A Note B Capital budget Note C Note D Note E Income statement Unchanged Note F $ 525,000 1,485,000 (1,407,750) $ 602,250 $ 150,000 720,000 (810,000) $ 60,000 *Also equals 2,000 units @ $30 = $60,000

Enaing mercnanalse lnventory~ » bv,vvv 0/10 *Also equals 2,000 units @ $30 = $60,000 points awarded Note C m Beginning equipment $ 540,000 Purchased in January 36,000 Purchased in February 96,000 eBook Purchased in March 28,800 References Ending equipment $ 700,800 Note D Beginning accumulated depreciation $ 67,500 Depreciation expense 20,300 Ending accumulated depreciation $ 87,800 Note E Beginning accounts payables $ 360,000 Purchases 720,000 Payments (530,400) Ending accounts payables $ 549,600 Note F Beginning retained earnings $ 246,000 Net income 180, 330 Ending retained earnings $ 426,330