Problem 22-5A Merchandising: Preparation of a complete master budget LO C2, p.P2

Question

Problem 22-5A Merchandising: Preparation of a complete master budget LO C2, p.P2 The following information applies to the questions displayed below, Near the end of 2013, the management of Dimsdale Sports Co, a merchandising company, prepared the following estimated belence sheet for December 31, 2013. DIMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2013 Assets Cash Accounts recelvable Inventory $ 35,500 520,000 95,000 Total current assets 650,500 $ 537,000 67,125 Equipment, net 469.875 Total assets $ 1,120.375 Liabilities and Equity Accounts payable Bank loan payable T axes payable (due 3/15/2014) 375,000 15,000 92.000 Total liabilities Common stock Retained earning $ 482.000 470.500 167,875 Total stockholders' equity 638,375 Total iabilities and equity S 1,120,375 To prepare a master budget for January. February, and March of 2014, management gathers the following

Explanation / Answer

Dimdale Sports Company Merchandise Purchases Budget January, February and March 2016 January February March Next Month's Budgeted Sales (Units) 8700 11000 10500 Ratio of Inventory to Future Sales 20% 20% 20% Closing Inventory (Units) 1740 2200 2100 Sales of Current Month 7500 8700 11000 Required Units of available Merchandise 9240 10900 13100 Opening Inventory 4750 1740 2200 Units to be Purchased 11990 17860 21900 Purchase Cost $20 $20 $20 Total Purchase Cost $239,800 $357,200 $438,000 Cost of Sales 300000 348000 440000 Dimdale Sports Schedule of Collection of Sales Budget January, February and March 2016 Sales Sales In Units 7500 8700 11000 Sales Price Per Unit $53 $53 $53 Total Sales Value $397,500 $461,100 $583,000 Cash Sales $119,250 $138,330 $174,900 Credit Sales $278,250 $322,770 $408,100 Collection Of Credit Sales of Last Month(61%)                      -   $169,732.50 $196,889.70 Collection Of Credit Sales of Last to Last Month (39%)                      -                           -   $108,517.50 Cash Sales Collection $119,250 $138,330 $174,900 Collection of Debtors $125,000 $395,000                            -   Total Collection of Sales Value    244,250.00        703,062.50          480,307.20 Accounts Receivable balance as on 31st March $533,980.30 Dimdale Sports Company Schedule of Payments of Purchases January, February and March 2016 January February March Total Purchases $239,800 $357,200 $438,000 Payment for Accounts Payable $85,000 $290,000                            -   Payment for Last Month's Purchase                      -   $47,960 $71,440 Payment for Purchase of Last to Last Month                      -                           -   $191,840 Total Payments for Purchase $85,000 $337,960          263,280.00 Accounts Payable Balance as on 31st March $723,760 Dimdale Sports Company Cash Budget January, February and March 2016 January February March Opening Cash Balance $35,500 $43,200 $199,183 Collection From Sales $244,250 $703,063 $480,307 Total Cash Available (A) $279,750 $746,263 $679,490 Cash Payments Cash Payments for Purchase $85,000 $337,960 $263,280 Sales & Administritative Expense Sales Salaries $7,000 $7,000 $7,000 Sales Commisison $79,500 $92,220 $116,600 General and Administrative Salaries $11,000 $11,000 $11,000 Maintenance Expense $1,900 $1,900 $1,900 Capital Expenditure Equipment purchase $37,000 $97,000 $29,000 Land Purchase $150,000 Income Tax $92,000 Total Payments To Be Made(B) $221,400 $547,080 $670,780 Finance Loan ($15,000) $0 $35,000 Interest ($150)                         -   $0 Total Finance- C ($15,150) $0 $35,000 Closing Cash Balance $43,200 $199,183 $43,710 Dimdale Sports Company Income Statement For the Quarter Ended 31st March 2016 Total Sales $1,441,600 Less: Cost of Sales Opening Inventory $            95,000 Purchases $      1,035,000 Closing Inventory $         (42,000) $        1,088,000 Less: Sales and Administrative Expenses $348,020 Depreciation $20,260 Earning before Interest and Tax ($14,680) Interest $150 Net Loss ($14,830) Dimdale Sports Company Budgeted Balance Sheet as on 31st March 2016 Assets Cash $43,710 Accounts Receivable $533,980 Inventory 42000 Total Current Assets $619,690 Equipment $700,000 Less: Accumulated Depreciation $87,385 Equipments Net $612,615 Land $150,000 Total Assets $1,382,305 Liabilities and Equities Accounts Payable $723,760 Bank Loan Payable $35,000 Total Liabilities $758,760 Common Stock $470,500 Retained Earnings $153,045 Total Shareholders' Equity $623,545 Total Liabilities and Equity Shareholders Fund $1,382,305

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