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 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 Retained earnings Total liabilities and stockholders' equity S 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 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 S6,000 of this total amount is depreciation expense and the remaining $34,000 relates to expenses that are
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 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 Retained earnings Total liabilities and stockholders' equity S 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 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 S6,000 of this total amount is depreciation expense and the remaining $34,000 relates to expenses that are
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.
Question
Transcribed Image Text:**Required:**
1. Prepare a schedule of expected cash collections for July, August, and September.
**1. Cash Collections for Q3**
| | July | August | September | Q3 |
|-----------------------|------|--------|-----------|-----|
| **From A/R** | | | | |
| **From July sales** | | | | |
| **From Aug sales** | | | | |
| **From Sep sales** | | | | |
| **Total cash collections** | | | | |
This table outlines a request to prepare a schedule detailing expected cash collections over the months of July, August, and September, contributing to the third quarter (Q3) financial overview. The line items in the table include:
- **From A/R:** Refers to the cash expected to be collected from Accounts Receivable.
- **From July sales:** Refers to cash collected from sales made in July.
- **From August sales:** Refers to cash collected from sales made in August.
- **From September sales:** Refers to cash collected from sales made in September.
- **Total cash collections:** The aggregate of all expected cash collections over the specified months.
This schedule is crucial for financial planning and cash flow management.
Transcribed Image Text:**Crow Enterprises: Schedules of Expected Cash Collections and Disbursements; Budgeted Income Statement and Budgeted Balance Sheet**
Crow Enterprises is a merchandising company preparing a master budget for the third quarter of the calendar year. The company’s balance sheet as of June 30th is displayed 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. **Sales Estimates**:
- Sales for July, August, September, and October are projected to be $220,000, $240,000, $230,000, and $250,000, respectively.
2. **Credit Sales Collection**:
- All sales are on credit and fully collected. Each month, credit sales are collected 35% in the month of sale and 65% in the following month. All of the accounts receivable as of June 30 will be collected in July.
3. **Inventory Management**:
- Ending inventory must cover 25% of the cost for the following month's sales. Costs of goods sold equate to 75% of sales. The company pays 40% of its purchases in the purchase month and the remaining 60% in the next month. All accounts payable as of June 30 are paid in July.
4. **Fixed Expenses**:
- Monthly selling and administrative expenses are $40,000. Of this, $6,000 is depreciation, while $34,000 is cash expenses payable in the month they incur.
5. **Stock Policy**:
- No plans exist to pay dividends or change stock or equity during the quarter. The quarter ends on September 30.
This balance sheet summary and managerial assumptions provide key insights into the company’s financial planning and operational expectations for the upcoming quarter, which involve careful monitoring of sales, credit collection, inventory management, and expense control.
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