Sound Effects Audio Systems sells and installs car stereo systems. Managers need to prepare an inventory purchases budget for the first quarter of Year 2. The company's sales budget for the first quarter is provided below: Budgeted Sales January $207,000 February $203,000 March $187,000 Based on past experience, the company expects the cost goods sold to equal 80% of sales. Furthermore, the ending inventory balance each month should be $11,500 plus 20% of the current period's cost of goods sold. The inventory balance on December 31, Year 1 was $37,500. The company makes all purchases on account and pays 60% of accounts payable in the month of purchase and the remaining 40% in the next month. Accounts payable stood at $43,000 at December 31, Year 1. Required: a. Prepare an inventory purchases budget for January, February, and March of Year 2. b. Determine the amount of ending inventory and the accounts payable balance that will appear on the March 31, Year 2 pro forma balance sheet. c. Prepare a schedule of cash payments for inventory for January, February, and March, Year.
Sound Effects Audio Systems sells and installs car stereo systems. Managers need to prepare an inventory purchases budget for the first quarter of Year 2. The company's sales budget for the first quarter is provided below: Budgeted Sales January $207,000 February $203,000 March $187,000 Based on past experience, the company expects the cost goods sold to equal 80% of sales. Furthermore, the ending inventory balance each month should be $11,500 plus 20% of the current period's cost of goods sold. The inventory balance on December 31, Year 1 was $37,500. The company makes all purchases on account and pays 60% of accounts payable in the month of purchase and the remaining 40% in the next month. Accounts payable stood at $43,000 at December 31, Year 1. Required: a. Prepare an inventory purchases budget for January, February, and March of Year 2. b. Determine the amount of ending inventory and the accounts payable balance that will appear on the March 31, Year 2 pro forma balance sheet. c. Prepare a schedule of cash payments for inventory for January, February, and March, Year.
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
A9
Transcribed Image Text:Sound Effects Audio Systems sells and installs car stereo systems. Managers need to prepare an inventory purchases budget for the
first quarter of Year 2. The company's sales budget for the first quarter is provided below:
Budgeted Sales
January
$207,000
February
$203,000
March
$187,000
Based on past experience, the company expects the cost goods sold to equal 80% of sales. Furthermore, the ending inventory
balance each month should be $11,500 plus 20% of the current period's cost of goods sold. The inventory balance on December 31,
Year 1 was $37,500. The company makes all purchases on account and pays 60% of accounts payable in the month of purchase and
the remaining 40% in the next month. Accounts payable stood at $43,000 at December 31, Year 1.
Required:
a. Prepare an inventory purchases budget for January, February, and March of Year 2.
b. Determine the amount of ending inventory and the accounts payable balance that will appear on the March 31, Year 2 pro forma
balance sheet.
c. Prepare a schedule of cash payments for inventory for January, February, and March, Year.
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