Mecca 1 Company, a retailer of specialty wall-papers, prepares a monthly master budget. Data for the September master budget are given below: a. The August 31st balance sheet (Actual): b. C. h. August-Actual cash September-Projected October-Projected November-Projected $38,000 accounts payable $133,144 138,000 accounts receivable inventory 52,650 building and equipment (net) 212,500 Actual sales for August and budgeted sales for September, October, and November are given below: capital stock 280,000 retained earnings 28,006 $230,000 390,000 405,000 320,000 Sales are 40% for cash and 60% on credit. All credit sales are collected in the month following the sale. There are no bad debts. The gross margin percentage is 55% of sales. The desired ending inventory is equal to 30% of the following d. month's COGS. One fourth of the purchases are paid for in the month of the purchase and the remaining 75% are purchased on account and paid in full the following month. e. The monthly operating expenses are $110,000 including the monthly depreciation of $12,000 In September, Mecca Company will purchase new office equipment for $60,000 cash. The expected useful life of f. the new equipment is 5 years, with no salvage value. It will be depreciated using the straight-line method. Mecca will start depreciating the equipment in September (full month). g. Dividends of $22,500 and $28,000 will be declared and paid in September and October, respectively. The company must maintain a minimum cash balance of $38,000. A line of credit is used to maintain this balance. Borrowing will be made in increments of $1,000. All borrowing is done at the beginning of the month and repayments are made at the end of the month. The annual interest rate is 12%, paid when the loan is repaid ( ignore the accrual of interest). Required: 1. Prepare a balance sheet, income statement, and cash budget for the month of September.
Mecca 1 Company, a retailer of specialty wall-papers, prepares a monthly master budget. Data for the September master budget are given below: a. The August 31st balance sheet (Actual): b. C. h. August-Actual cash September-Projected October-Projected November-Projected $38,000 accounts payable $133,144 138,000 accounts receivable inventory 52,650 building and equipment (net) 212,500 Actual sales for August and budgeted sales for September, October, and November are given below: capital stock 280,000 retained earnings 28,006 $230,000 390,000 405,000 320,000 Sales are 40% for cash and 60% on credit. All credit sales are collected in the month following the sale. There are no bad debts. The gross margin percentage is 55% of sales. The desired ending inventory is equal to 30% of the following d. month's COGS. One fourth of the purchases are paid for in the month of the purchase and the remaining 75% are purchased on account and paid in full the following month. e. The monthly operating expenses are $110,000 including the monthly depreciation of $12,000 In September, Mecca Company will purchase new office equipment for $60,000 cash. The expected useful life of f. the new equipment is 5 years, with no salvage value. It will be depreciated using the straight-line method. Mecca will start depreciating the equipment in September (full month). g. Dividends of $22,500 and $28,000 will be declared and paid in September and October, respectively. The company must maintain a minimum cash balance of $38,000. A line of credit is used to maintain this balance. Borrowing will be made in increments of $1,000. All borrowing is done at the beginning of the month and repayments are made at the end of the month. The annual interest rate is 12%, paid when the loan is repaid ( ignore the accrual of interest). Required: 1. Prepare a balance sheet, income statement, and cash budget for the month of September.
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:Mecca 1 Company, a retailer of specialty wall-papers, prepares a monthly master budget. Data for the September master
budget are given below:
a. The August 31st balance sheet (Actual):
b.
C.
e.
f.
h.
cash
August-Actual
September-Projected
October-Projected
November-Projected
$38,000 accounts payable $133,144
138,000
accounts receivable
inventory
52,650
building and equipment (net) 212,500
capital stock
retained earnings
Actual sales for August and budgeted sales for September, October, and November are given
below:
280,000
28,006
$230,000
390,000
The gross margin percentage is 55% of sales. The desired ending inventory is equal to 30% of the following
d. month's COGS. One fourth of the purchases are paid for in the month of the purchase and the remaining 75% are
purchased on account and paid in full the following month.
The monthly operating expenses are $110,000 including the monthly depreciation of $12,000
In September, Mecca Company will purchase new office equipment for $60,000 cash. The expected useful life of
the new equipment is 5 years, with no salvage value. It will be depreciated using the straight-line method. Mecca
will start depreciating the equipment in September (full month).
g. Dividends of $22,500 and $28,000 will be declared and paid in September and October, respectively.
The company must maintain a minimum cash balance of $38,000. A line of credit is used to maintain this balance.
Borrowing will be made in increments of $1,000. All borrowing is done at the beginning of the month and
repayments are made at the end of the month. The annual interest rate is 12%, paid when the loan is repaid (
ignore the accrual of interest).
Required:
1. Prepare a balance sheet, income statement, and cash budget for the month of September.
405,000
320,000
Sales are 40% for cash and 60% on credit. All credit sales are collected in the month following the sale. There are
no bad debts.
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