Timberline Ltd. manufactures and sells a single product The company is preparing

Question

Timberline Ltd. manufactures and sells a single product The company is preparing a monthly budget for the first quarter of 20x1. The following information has been accumulated: Projected sales for December 20x0 are $600,000. For the first quarter, the company believes that sales will increase by 10% each month over the previous month's sales. Sales will then remain constant for the second quarter. Sales on account are typically 75% of total sales. Records indicate that 55% of the credit sales are collected during the month of sale, and the remainder are collected during the following month. a. Management has determined that an ending inventory equal to 25% of next month's sales is required to fit sales demands. b Cost of goods sold are typically 65% of sales. Inventory is purchased on account. Timberline pays for 20% of a month's purchases in the month of purchase and the remainder in the following month. C. d. Monthly expenses are estimated as follows: Training and development . Property and business taxes . Supervisor's salary . Depreciation · Insurance . Administrative salaries $10,000 1,000 7,000 15,000 16,000 25,000 Property and business taxes are paid on March 31t for the six month period Sales commissions are 2% of gross sales. ·

Explanation / Answer

Sales Budget Dec. Jan Feb Mar Total For the qtr. Sales 600000 660000 726000 798600 2184600 Credit sales 450000 495000 544500 598950 Cash Sales 165000 181500 199650 Cash Receipts Budget Cash Sales 165000 181500 199650 55% of Credit Sales 272250 299475 329422.5 45% of Credit Sales 202500 222750 245025 Total 639750 703725 774097.5 Purchase budget Op.Stock 107250 117975 129772.5 107250 Purchases(Bal.Fig.) 399750 439725 483697.5 744315 1667738 COGS-65%*Sales 390000 429000 471900 519090 1419990 Ending Inventory 107250 117975 129772.5 354997.5 354997.5 Purchases 399750 439725 483697.5 744315 Cash Disbursement budget 20% purchases 87945 96739.5 148863 80% Purchases 319800 351780 386958 Total purchases 407745 448519.5 535821 Training & Development 10000 10000 10000 30000 Property & Busiess Taxes 6000 Supervisor's salary 7000 7000 7000 21000 Insurance 16000 16000 16000 48000 Admn. Salaries 25000 25000 25000 75000 Sales commission @2% 13200 14520 15972 43692 Purchase of land 200000 Dividends 75000 75000 Total Cash Disbursements 678945 521039.5 690793 Cash Budget Op balance 92000 52805 235490.5 Add: Sales Receipts 639750 703725 774097.5 731750 756530 1009588 Less: Cash Disbursements 678945 521039.5 690793 Excess of receipts over disbursements 52805 235490.5 318795 Budgeted Income Statement Sales 2184600 Less:COGS 1419990 764610 Training & Development 30000 Property & Busiess Taxes 3000 Supervisor's salary 21000 Depreciation 45000 Insurance 48000 Admn. Salaries 75000 Sales commission @2% 43692 265692 Net Operating Income 498918 Income Tax @ 25% 124729.5 Income After tax 374188.5 Dividends for the qtr. 75000 Balance C/d to Ret.Earnings 299188.5 Budgeted Statement of Retained Earnings Opening Balance 203950 Current year Net Income 299188.5 Balance @ end of Qtr. 503138.5 Budgeted Balance Sheet Cash 318795 Accounts Payables 595452 Accounts Receivables 269527.5 Income tax payable 149729.5 Inventory 354997.5 Share Capital 800000 Capital asset (Net) 855000 Retained Earnings 503138.5 Land 250000 2048320 2048320

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