GrowMaster Products, a rapidly growing distributor of home gardening equipment, is formulating its plans for the coming year. Carol Jones, the firm's marketing director, has completed the following sales forecast. Month Sales Month Sales January $900,000 July $1,500,000 February $1,000,000 August $1,500,000 March $900,000 September $1,600,000 April $1,150,000 October $1,600,000 May $1,250,000 November $1,500,000 June $1,400,000 December $1,700,000 Phillip Smith, an accountant in the Planning and Budgeting Department, is responsible for preparing the cash flow projection. He has gathered the following information. • All sales are made on credit. GrowMaster's excellent record in accounts receivable collection is expected to continue, with 60% of billings collected in the month after sale and the remaining 40% collected two months after the sale. Cost of goods sold, GrowMaster's largest expense, is estimated to equal 40% of sales dollars. Seventy percent of inventory is purchased one month prior to sale and 30% during the month of sale. For example, in April, 30% of April cost of goods sold is purchased and 70% of May cost of goods sold is purchased. • All purchases are made on account. Historically, 75% of accounts payable have been paid during the month of purchase, and the remaining 25% in the month following purchase. • Hourly wages and fringe benefits, estimated at 30% of the current month's sales, are paid in the month incurred. * General and administrative expenses are projected to be $1,550,000 for the year. A breakdown of the expenses follows. All expenditures are paid monthly throughout the year, with the exception of property taxes, which are paid in four equal installments at the end of each quarter. Salaries and fringe benefits $ 324,000 Advertising 372,000 Property taxes 136,000 Insurance 192,000 Utilities 180,000 Depreciation 346,000 Total $ 1,550,000 • Operating income for the first quarter of the coming year is projected to be $320,000. GrowMaster is subject to a 40% tax rate. The company pays 100% of its estimated taxes in the month following the end of each quarter. • GrowMaster maintains a minimum cash balance of $50,000. If the cash balance is less than $50,000 at the end of the month, the company borrows against its 12% line of credit in order to maintain the balance. All borrowings are made at the beginning of the month, and all repayments are made at the end of the month (in increments of $1,000). Accrued interest is paid in full with each principal repayment. The projected cash balance on April 1 is $50,000. Prepare the cash receipts budget for the second quarter. (Enter answers in necessary fields only. Leave other fields blank. Do not enter 0.) Cash Receipts Budget April May June Total Cash Receipts February sales $4 $4 March sales April sales May sales Totals Accounts Receivable balance at the end of second quarter of 2015 $ Prepare the purchases budget for the second quarter. (Round answers to 0 decimal places, e.g. 5,275. Enter answers in necessary fields only. Leave other fields blank. Do not enter 0.) Purchases Budget April May June Total Purchases April COGS $4 $ May COGS June COGS July COGS Totals Prepare the cash payments budget for the second quarter. (Round answers to 0 decimal places, e.g. 5,275. Enter answers in necessary fields only. Leave other fields blank. Do not enter 0.) Cash Payments Budget April May June March purchases 2$ April purchases May purchases June purchases Accounts Payable balance at the end of second quarter of 2015 $

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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GrowMaster Products, a rapidly growing distributor of home gardening
equipment, is formulating its plans for the coming year. Carol Jones, the
firm's marketing director, has completed the following sales forecast.
Month
Sales
Month
Sales
January
$900,000
July
$1,500,000
February
$1,000,000
August
$1,500,000
March
$900,000
September
$1,600,000
April
$1,150,000
October
$1,600,000
May
$1,250,000
November
$1,500,000
June
$1,400,000
December
$1,700,000
Phillip Smith, an accountant in the Planning and Budgeting Department, is
responsible for preparing the cash flow projection. He has gathered the
following information.
• All sales are made on credit.
GrowMaster's excellent record in accounts receivable collection is
expected to continue, with 60% of billings collected in the month after
sale and the remaining 40% collected two months after the sale.
Cost of goods sold, GrowMaster's largest expense, is estimated to equal
40% of sales dollars. Seventy percent of inventory is purchased one
month prior to sale and 30% during the month of sale. For example, in
April, 30% of April cost of goods sold is purchased and 70% of May cost
of goods sold is purchased.
• All purchases are made on account. Historically, 75% of accounts
payable have been paid during the month of purchase, and the
remaining 25% in the month following purchase.
• Hourly wages and fringe benefits, estimated at 30% of the current
month's sales, are paid in the month incurred.
* General and administrative expenses are projected to be $1,550,000 for
the year. A breakdown of the expenses follows. All expenditures are paid
monthly throughout the year, with the exception of property taxes,
which are paid in four equal installments at the end of each quarter.
Salaries and fringe benefits
$ 324,000
Advertising
372,000
Property taxes
136,000
Insurance
192,000
Utilities
180,000
Depreciation
346,000
Total
$ 1,550,000
• Operating income for the first quarter of the coming year is projected to
be $320,000. GrowMaster is subject to a 40% tax rate. The company
pays 100% of its estimated taxes in the month following the end of each
quarter.
• GrowMaster maintains a minimum cash balance of $50,000. If the cash
balance is less than $50,000 at the end of the month, the company
borrows against its 12% line of credit in order to maintain the balance.
All borrowings are made at the beginning of the month, and all
repayments are made at the end of the month (in increments of
$1,000). Accrued interest is paid in full with each principal repayment.
The projected cash balance on April 1 is $50,000.
Transcribed Image Text:GrowMaster Products, a rapidly growing distributor of home gardening equipment, is formulating its plans for the coming year. Carol Jones, the firm's marketing director, has completed the following sales forecast. Month Sales Month Sales January $900,000 July $1,500,000 February $1,000,000 August $1,500,000 March $900,000 September $1,600,000 April $1,150,000 October $1,600,000 May $1,250,000 November $1,500,000 June $1,400,000 December $1,700,000 Phillip Smith, an accountant in the Planning and Budgeting Department, is responsible for preparing the cash flow projection. He has gathered the following information. • All sales are made on credit. GrowMaster's excellent record in accounts receivable collection is expected to continue, with 60% of billings collected in the month after sale and the remaining 40% collected two months after the sale. Cost of goods sold, GrowMaster's largest expense, is estimated to equal 40% of sales dollars. Seventy percent of inventory is purchased one month prior to sale and 30% during the month of sale. For example, in April, 30% of April cost of goods sold is purchased and 70% of May cost of goods sold is purchased. • All purchases are made on account. Historically, 75% of accounts payable have been paid during the month of purchase, and the remaining 25% in the month following purchase. • Hourly wages and fringe benefits, estimated at 30% of the current month's sales, are paid in the month incurred. * General and administrative expenses are projected to be $1,550,000 for the year. A breakdown of the expenses follows. All expenditures are paid monthly throughout the year, with the exception of property taxes, which are paid in four equal installments at the end of each quarter. Salaries and fringe benefits $ 324,000 Advertising 372,000 Property taxes 136,000 Insurance 192,000 Utilities 180,000 Depreciation 346,000 Total $ 1,550,000 • Operating income for the first quarter of the coming year is projected to be $320,000. GrowMaster is subject to a 40% tax rate. The company pays 100% of its estimated taxes in the month following the end of each quarter. • GrowMaster maintains a minimum cash balance of $50,000. If the cash balance is less than $50,000 at the end of the month, the company borrows against its 12% line of credit in order to maintain the balance. All borrowings are made at the beginning of the month, and all repayments are made at the end of the month (in increments of $1,000). Accrued interest is paid in full with each principal repayment. The projected cash balance on April 1 is $50,000.
Prepare the cash receipts budget for the second quarter. (Enter answers
in necessary fields only. Leave other fields blank. Do not enter 0.)
Cash Receipts Budget
April
May
June
Total Cash Receipts
February sales
$4
$4
March sales
April sales
May sales
Totals
Accounts Receivable balance at the end of second quarter of 2015 $
Prepare the purchases budget for the second quarter. (Round answers
to 0 decimal places, e.g. 5,275. Enter answers in necessary fields
only. Leave other fields blank. Do not enter 0.)
Purchases Budget
April
May
June
Total Purchases
April COGS
$4
$
May COGS
June COGS
July COGS
Totals
Prepare the cash payments budget for the second quarter. (Round
answers to 0 decimal places, e.g. 5,275. Enter answers in
necessary fields only. Leave other fields blank. Do not enter 0.)
Cash Payments Budget
April
May
June
March
purchases
2$
April purchases
May purchases
June purchases
Accounts Payable balance at the end of second quarter of 2015 $
Transcribed Image Text:Prepare the cash receipts budget for the second quarter. (Enter answers in necessary fields only. Leave other fields blank. Do not enter 0.) Cash Receipts Budget April May June Total Cash Receipts February sales $4 $4 March sales April sales May sales Totals Accounts Receivable balance at the end of second quarter of 2015 $ Prepare the purchases budget for the second quarter. (Round answers to 0 decimal places, e.g. 5,275. Enter answers in necessary fields only. Leave other fields blank. Do not enter 0.) Purchases Budget April May June Total Purchases April COGS $4 $ May COGS June COGS July COGS Totals Prepare the cash payments budget for the second quarter. (Round answers to 0 decimal places, e.g. 5,275. Enter answers in necessary fields only. Leave other fields blank. Do not enter 0.) Cash Payments Budget April May June March purchases 2$ April purchases May purchases June purchases Accounts Payable balance at the end of second quarter of 2015 $
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