c. Eighty percent of a quarter's merchandise purchases are paid for within the quarter. The remainder is paid for in the following quarter. d. Selling and administrative expenses for next year are budgeted at $50,000 per quarter plus 15% of sales. Of the fixed amount, $20,000 each quarter is depreciation. e. The company will pay $10,000 in dividends each quarter. f. Land purchases of $75,000 will be made in the second quarter, and purchases of $48,000 will be made in the third quarter. These purchases will be for cash. g. The Cash account contained $10,000 at the end of the current year. The treasurer feels that this represents a minimum balance that must be maintained. h. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each quarter, up to a total loan balance of $100,000. The interest rate on these loans is 2.5% per quarter 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 year. i. At present, the company has no loans outstanding. equired: Prepare the following by quarter and in total for next year: a. A schedule of expected cash collections. b. A schedule of expected cash disbursements for merchandise purchases. Compute the expected cash disbursements for selling and administrative expenses, by quarter d in total, for next year. Prepare a cash budget, by quarter and in total, for next year.
c. Eighty percent of a quarter's merchandise purchases are paid for within the quarter. The remainder is paid for in the following quarter. d. Selling and administrative expenses for next year are budgeted at $50,000 per quarter plus 15% of sales. Of the fixed amount, $20,000 each quarter is depreciation. e. The company will pay $10,000 in dividends each quarter. f. Land purchases of $75,000 will be made in the second quarter, and purchases of $48,000 will be made in the third quarter. These purchases will be for cash. g. The Cash account contained $10,000 at the end of the current year. The treasurer feels that this represents a minimum balance that must be maintained. h. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each quarter, up to a total loan balance of $100,000. The interest rate on these loans is 2.5% per quarter 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 year. i. At present, the company has no loans outstanding. equired: Prepare the following by quarter and in total for next year: a. A schedule of expected cash collections. b. A schedule of expected cash disbursements for merchandise purchases. Compute the expected cash disbursements for selling and administrative expenses, by quarter d in total, for next year. Prepare a cash budget, by quarter and in total, for next year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Transcribed Image Text:c. Eighty percent of a quarter's merchandise purchases are paid for within the quarter.
The remainder is paid for in the following quarter.
d. Selling and administrative expenses for next year are budgeted at $50,000 per quarter
plus 15% of sales. Of the fixed amount, $20,000 each quarter is depreciation.
e. The company will pay $10,000 in dividends each quarter.
f. Land purchases of $75,000 will be made in the second quarter, and purchases of
$48,000 will be made in the third quarter. These purchases will be for cash.
g. The Cash account contained $10,000 at the end of the current year. The treasurer feels
that this represents a minimum balance that must be maintained.
h. The company has an agreement with a local bank that allows the company to borrow
in increments of $1,000 at the beginning of each quarter, up to a total loan balance of
$100,000. The interest rate on these loans is 2.5% per quarter 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 year.
i. At present, the company has no loans outstanding.
equired:
Prepare the following by quarter and in total for next year:
a. A schedule of expected cash collections.
b. A schedule of expected cash disbursements for merchandise purchases.
Compute the expected cash disbursements for selling and administrative expenses, by quarter
d in total, for next year.
Prepare a cash budget, by quarter and in total, for next year.
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