Crow Enterprises is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The company's balance sheet as of June 30th is shown below: Crow Enterprises Balance Sheet June 30 Assets Cash Accounts receivable $ 80,000 135,000 41,250 Plant and equipment, net of depreciation 211,000 $ 457,250 Inventory Total assets Liabilities and Stockholders' Equity Accounts payable Common stock $ 72,000 345,000 50,250 Total liabilities and stockholders' equity S 467,250 Retained earnings Crow's managers have made the following additional assumptions and estimates: 1. Estimated sales for July, August, September, and October will be $220,000, $240,000, $230,000, and $250,000, respectively. 2. All sales are on credit and all credit sales are collected. Each month's credit sales are collected 35% in the month of sale and 65% in the month following the sale. All of the accounts receivable at June 30 will be collected in July. 3. Each month's ending inventory must equal 25% of the cost of next month's sales. The cost of goods sold is 75% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at June 30 will be paid in July. 4. Monthly selling and administrative expenses are always $40,000. Each month $6,000 of this total amount is depreciation expense and the remaining $34,000 relates to expenses that are paid in the month they are incurred. 5. The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30.
Crow Enterprises is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The company's balance sheet as of June 30th is shown below: Crow Enterprises Balance Sheet June 30 Assets Cash Accounts receivable $ 80,000 135,000 41,250 Plant and equipment, net of depreciation 211,000 $ 457,250 Inventory Total assets Liabilities and Stockholders' Equity Accounts payable Common stock $ 72,000 345,000 50,250 Total liabilities and stockholders' equity S 467,250 Retained earnings Crow's managers have made the following additional assumptions and estimates: 1. Estimated sales for July, August, September, and October will be $220,000, $240,000, $230,000, and $250,000, respectively. 2. All sales are on credit and all credit sales are collected. Each month's credit sales are collected 35% in the month of sale and 65% in the month following the sale. All of the accounts receivable at June 30 will be collected in July. 3. Each month's ending inventory must equal 25% of the cost of next month's sales. The cost of goods sold is 75% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at June 30 will be paid in July. 4. Monthly selling and administrative expenses are always $40,000. Each month $6,000 of this total amount is depreciation expense and the remaining $34,000 relates to expenses that are paid in the month they are incurred. 5. The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
Question
Transcribed Image Text:### Income Statement Preparation
To prepare an income statement that shows net operating income for the quarter ended on September 30, follow the template given below. This example relates to Crow Enterprises.
#### Crow Enterprises
#### Income Statement
#### For the Quarter Ended September 30
1. **Sales**: The total revenue generated from goods sold or services provided during the quarter.
2. **Cost of Goods Sold (COGS)**: The direct costs attributable to the production of goods sold by the enterprise. This includes materials and labor directly tied to production.
3. **Gross Margin**: This is calculated by subtracting the COGS from Sales. It represents the company's core profitability on sales before accounting for operating expenses.
4. **Selling & Admin Expenses**: These are operating expenses related to the selling of goods and general administrative functions, such as salaries, rent, utilities, and marketing.
5. **Net Operating Income**: This is derived from subtracting Selling & Admin Expenses from the Gross Margin. It indicates the profit made from core business operations, excluding any income from non-operating activities.
Use this framework to display the financial performance of Crow Enterprises for the specified period clearly and concisely. Adjust values as necessary based on actual figures.
Transcribed Image Text:**Schedules of Expected Cash Collections and Disbursements; Budgeted Income Statement and Budgeted Balance Sheet**
Crow Enterprises is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The company's balance sheet as of June 30th is shown below:
---
**Crow Enterprises**
*Balance Sheet*
June 30
**Assets**
- Cash: $80,000
- Accounts Receivable: $135,000
- Inventory: $41,250
- Plant and Equipment, net of depreciation: $211,000
- Total Assets: $457,250
**Liabilities and Stockholders’ Equity**
- Accounts Payable: $72,000
- Common Stock: $345,000
- Retained Earnings: $50,250
- Total Liabilities and Stockholders’ Equity: $467,250
---
Crow’s managers have made the following additional assumptions and estimates:
1. Estimated sales for July, August, September, and October will be $220,000, $240,000, $230,000, and $250,000, respectively.
2. All sales are on credit and all credit sales are collected. Each month's credit sales are collected 35% in the month of the sale and 65% in the month following the sale. All of the accounts receivable at June 30 will be collected in July.
3. Each month's ending inventory must equal 25% of the cost of next month's sales. The cost of goods sold is 75% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at June 30 will be paid in July.
4. Monthly selling and administrative expenses are always $40,000. Each month, $6,000 of this amount is in depreciation expense and the remaining $34,000 relates to expenses that are paid in the month they are incurred.
5. The company plans to pay a cash dividend of $10,000 each quarter. The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30.
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