Cash Accounts receivable ($26,000 February sales; $320,000 March sales) Inventory Prepaid insurance Property and equipment (net) Total assets Liabilities and Stockholders' Equity Accounts payable Dividends payable Common stock Retained earnings Total liabilities and stockholders' equity $ 74,000 346,000 104,000 21,000 950,000 $1,495,000 $ 100,000 15,000 800,000 580,000 $1,495,000 2 The company maintains a minimum cash balance of $50,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month. The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $50,000 in cash. Required: Prepare a master budget for the three-month period ending June 30. Include the following detailed schedules: 1.a. A sales budget, by month and in total. b. A schedule of expected cash collections, by month and in total. c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. d. A schedule of expected cash disbursements for merchandise purchases, by month and in total.
Cash Accounts receivable ($26,000 February sales; $320,000 March sales) Inventory Prepaid insurance Property and equipment (net) Total assets Liabilities and Stockholders' Equity Accounts payable Dividends payable Common stock Retained earnings Total liabilities and stockholders' equity $ 74,000 346,000 104,000 21,000 950,000 $1,495,000 $ 100,000 15,000 800,000 580,000 $1,495,000 2 The company maintains a minimum cash balance of $50,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month. The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $50,000 in cash. Required: Prepare a master budget for the three-month period ending June 30. Include the following detailed schedules: 1.a. A sales budget, by month and in total. b. A schedule of expected cash collections, by month and in total. c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. d. A schedule of expected cash disbursements for merchandise purchases, by month and in total.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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Cash
Accounts receivable ($26,000 February sales; $320,000 March sales)
Inventory
Prepaid insurance
Property and equipment (net)
Total assets
Liabilities and Stockholders' Equity
Accounts payable
Dividends payable
Common stock
Retained earnings
Total liabilities and stockholders' equity
€
74,000
346,000
104,000
21,000
950,000
$1,495,000
$ 100,000
15,000
800,000
580,000
$1,495,000
The company maintains a minimum cash balance of $50,000. All borrowing is done at the beginning of a
month; any repayments are made at the end of a month.
31.1
The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at
the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume
that interest is not compounded. At the end of the quarter, the company would pay the bank all of the
accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still
retaining at least $50,000 in cash.
www
by mand
Required:
Prepare a master budget for the three-month period ending June 30. Include the following detailed schedules:
1. a. A sales budget, by month and in total.
b. A schedule of expected cash collections, by month and in total.
c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total.
d. A schedule of expected cash disbursements for merchandise purchases, by month and in total.
2. A cash budget. Show the budget by month and in total. Determine any borrowing that would be
maintain the minimum cash balance of $50,00€
PRP
wa Line
moder
2
d
maršā s
MIAS
VERA
THE
CRE
Past.
SURE
⠀"
Transcribed Image Text:r
Cash
Accounts receivable ($26,000 February sales; $320,000 March sales)
Inventory
Prepaid insurance
Property and equipment (net)
Total assets
Liabilities and Stockholders' Equity
Accounts payable
Dividends payable
Common stock
Retained earnings
Total liabilities and stockholders' equity
€
74,000
346,000
104,000
21,000
950,000
$1,495,000
$ 100,000
15,000
800,000
580,000
$1,495,000
The company maintains a minimum cash balance of $50,000. All borrowing is done at the beginning of a
month; any repayments are made at the end of a month.
31.1
The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at
the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume
that interest is not compounded. At the end of the quarter, the company would pay the bank all of the
accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still
retaining at least $50,000 in cash.
www
by mand
Required:
Prepare a master budget for the three-month period ending June 30. Include the following detailed schedules:
1. a. A sales budget, by month and in total.
b. A schedule of expected cash collections, by month and in total.
c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total.
d. A schedule of expected cash disbursements for merchandise purchases, by month and in total.
2. A cash budget. Show the budget by month and in total. Determine any borrowing that would be
maintain the minimum cash balance of $50,00€
PRP
wa Line
moder
2
d
maršā s
MIAS
VERA
THE
CRE
Past.
SURE
⠀

Transcribed Image Text:r
retail outlets located in shopping malls across the country. In the past, the company has done very little in the
way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained
in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you
have worked with accounting and other areas to gather the information assembled below.
The company sells many styles of earrings, but all are sold for the same price-$10 per pair. Actual sales of
earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):
1
January (actual)
February (actual)
March (actual)
April (budget)
May (budget)
Variable:
The concentration of sales before and during May is due to Mother's Day. Sufficient inventory should be on hand
at the end of each month to supply 40% of the earrings sold in the following month.
Suppliers are paid $4 for a pair of earrings. One-half of a month's purchases is paid for in the month of
purchase; the other half is paid for in the following month. All sales are on credit. Only 20% of a month's sales
are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10%
is collected in the second month following sale. Bad debts have been negligible.
Monthly operating expenses for the company are given below:
Fixed:
Sales commissions
Advertising
Rent
20,000
26,000
40,000
65,000
Salaries
100,000
Utilities
Insurance
June (budget)
July (budget)
August (budget)
September (budget)
Depreciation
50,000
30,000
28,000
25,000
4% of sales
handi
by wr
ane that was be read
$200,000
$18,000
$106,000
$7,000
$3,000
$14,000
page 404
Insurance is paid on an annual basis, in November of each year.
The company plans to purchase $16,000 in new equipment during May and $40,000 in new equipment
during June; both purchases will be for cash. The
in the first month of the following quarter.
Ta
NICA
THE
CHE
PARE
in the month fo
Sunoclecit
⠀
Buk
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