Developing a Master Budget for a Merchandising Organization Peyton Department St
ID: 2476874 • Letter: D
Question
Developing a Master Budget for a Merchandising Organization Peyton Department Store prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for 2010. PEYTON DEPARTMENT STORE Balance Sheet March 31, 2010 Assets Liabilities and Stockholders' Equity Cash $2,000 Accounts payable $26,000 Accounts receivable 25,000 Dividends payable 17,000 Inventory 30,000 Rent payable 1,000 Prepaid Insurance 2,000 Stockholders' equity 40,000 Fixtures 25,000 Total assets $84,000 Total liabilities and equity $84,000 Actual and forecasted sales for selected months in 2010 are as follows: Month Sales Revenue January $70,000 February 50,000 March 40,000 April 50,000 May 60,000 June 70,000 July 90,000 August 80,000 Monthly operating expenses are as follows: Wages and salaries $26,000 Depreciation 100 Utilities 1,000 Rent 1,000 Cash dividends of $17,000 are declared during the third month of each quarter and are paid during the first month of the following quarter. Operating expenses, except insurance, rent, and depreciation are paid as incurred. Rent is paid during the following month. The prepaid insurance is for five more months. Cost of goods sold is equal to 50 percent of sales. Ending inventories are sufficient for 120 percent of the next month's sales. Purchases during any given month are paid in full during the following month. All sales are on account, with 50 percent collected during the month of sale, 40 percent during the next month, and 10 percent during the month thereafter. Money can be borrowed and repaid in multiples of $1,000 at an interest rate of 12 percent per year. The company desires a minimum cash balance of $2,000 on the first of each month. At the time the principal is repaid, interest is paid on the portion of principal that is repaid. All borrowing is at the beginning of the month, and all repayment is at the end of the month. Money is never repaid at the end of the month it is borrowed. (a) Prepare a purchases budget for each month of the second quarter ending June 30, 2010.
Budgeted purchases
(b) Prepare a cash receipts schedule for each month of the second quarter ending June 30, 2010. Do not include borrowings.
Only use negative signs, if needed, for: excess receipts over disbursements, balance before borrowings and cash balances (beginning and ending).
(c) Prepare a cash disbursements schedule for each month of the second quarter ending June 30, 2010. Do not include repayments of borrowings.
d) Prepare a cash budget for each month of the second quarter ending June 30, 2010. Include budgeted borrowings and repayments.
(e) Prepare an income statement for each month of the second quarter ending June 30, 2010.
Only use negative signs to show net losses in income.
(f) Prepare a budgeted balance sheet as of June 30, 2010.
$Answer
Peyton Department StoreMonthly Purchase Budget
Quarter Ending June 30, 2010 April May June Total
Budgeted purchases
(b) Prepare a cash receipts schedule for each month of the second quarter ending June 30, 2010. Do not include borrowings.
Only use negative signs, if needed, for: excess receipts over disbursements, balance before borrowings and cash balances (beginning and ending).
Peyton Department StoreSchedule of Monthly Cash Receipts
Quarter Ending June 30, 2010 April May June Total Total cash receipts $Answer $Answer $Answer $Answer
(c) Prepare a cash disbursements schedule for each month of the second quarter ending June 30, 2010. Do not include repayments of borrowings.
Peyton Department StoreSchedule of Monthly Cash Disbursements
Quarter Ending June 30, 2010 April May June Total Total cash disbursements $Answer $Answer $Answer $Answer
d) Prepare a cash budget for each month of the second quarter ending June 30, 2010. Include budgeted borrowings and repayments.
Peyton Department StoreMonthly Cash Budget
Quarter Ending June 30, 2010 April May June Total Cash balance, beginning $Answer $Answer $Answer $Answer Receipts Answer Answer Answer Answer Disbursements Answer Answer Answer Answer Excess receipts over disb. Answer Answer Answer Answer Balance before borrowings Answer Answer Answer Answer Borrowings Answer Answer Answer Answer Loan repayments Answer Answer Answer Answer Cash balance, ending $Answer $Answer $Answer $Answer
(e) Prepare an income statement for each month of the second quarter ending June 30, 2010.
Only use negative signs to show net losses in income.
Peyton Department StoreBudgeted Monthly Income Statements
Quarter Ending June 30, 2010 April May June Total Sales $Answer $Answer $Answer $Answer Cost of sales Answer Answer Answer Answer Gross profit Answer Answer Answer Answer Operating expenses: Wages and salaries Answer Answer Answer Answer Depreciation Answer Answer Answer Answer Utilities Answer Answer Answer Answer Rent Answer Answer Answer Answer Insurance Answer Answer Answer Answer Interest Answer Answer Answer Answer Total expenses Answer Answer Answer Answer Net income $Answer $Answer $Answer $Answer
(f) Prepare a budgeted balance sheet as of June 30, 2010.
Peyton Department StoreBudgeted Balance Sheet
June 30, 2010 Assets Liabilities and Equity Cash $Answer Merchandise payable $Answer Accounts receivable Answer Dividend payable Answer Inventory Answer Rent payable Answer Prepaid insurance Answer Loans payable Answer Fixtures Answer Interest payable Answer Total assets $Answer Stockholders' equity Answer Total liab. & equity $Answer $Answer $Answer $Answer
$Answer
Explanation / Answer
Dear student I have prepared this answer using two assumptions regarding ending inventory. It say 120% of sales but logically it should be 120% of COGS as if you see for March the ending inventory is $30000 which is 120% of COGS of April month i.e $25000. So first you will find from sales calculation and than from COGS see both and enter the solution. I think COGS can be used but in question it is written 120% of next month sales.
B Schedule of Expected Cash Collections April May June Total Feb March July Sales $50,000 $60,000 $70,000 $180,000 $50,000 40000 90000 For February sales $5,000 $5,000 For March Sales $16,000 $4,000 $20,000 For April sales $25,000 $20,000 $5,000 $50,000 For May sales $30,000 $24,000 $54,000 For June Sales $35,000 $35,000 Total A $46,000 $54,000 $64,000 $164,000 Accoumts Receivable (70000*50%+60000*10%) $41,000.0 a) Mercandise Purchase Budget April May June Total July Cost of Good sold 50% of sales $25,000 $30,000 $35,000 $90,000 45000 Closing Inventory 120%% of next month Sales $72,000 $84,000 $108,000 $264,000 Required Finished Goods $97,000 $114,000 $143,000 $354,000 Less: Beginning Inventory $30,000 $72,000 $84,000 $186,000 Required Purchases $67,000 $42,000 $59,000 $168,000 Accounts payable $59,000 Ending Inventory $108,000 2 b) Budgeted Cash Disbursement April May June Total 100% in next month $26,000 $67,000 $42,000 $84,000 Total Cash Disbursements for Purchases $26,000 $67,000 $42,000 $84,000 3 OPEARTING Expenses April May June Total Rent $1,000 $1,000 $1,000 $3,000 Wages & salaries $26,000 $26,000 $26,000 $78,000 Utilities $1,000 $1,000 $1,000 $3,000 Total $28,000 $28,000 $28,000 $84,000 April May June Total Beginning Cash balance 2000 $2,000 $2,000 2000 Add Cash Collection 46000 54000 64000 164000 Total cash available 48000 56000 66000 166000 Less: cash Disbursements Payment of Inventories $26,000 $67,000 $42,000 $84,000 Rent $1,000 $1,000 $1,000 $3,000 Wages & salaries $26,000 $26,000 $26,000 $78,000 Utilities $1,000 $1,000 $1,000 $3,000 Dividend Paid 17000 Total cash disbursement $71,000 $95,000 $70,000 $168,000 Excess of Surplus/( Deficiency) ($23,000) ($39,000) ($4,000) ($66,000) Minimum Cash balance 2000 $2,000 $2,000 $2,000 Cash balance Availablebafter minimum balance ($25,000) ($41,000) ($6,000) ($72,000) Borrowed/Repaid 25000 41000 6000 $72,000 Repayment $0 Interest 0 0 $0 Cash Balance $0 $0 $0 $0 Closing Cash Balance (Minimum Balance+cash balance) $2,000 $2,000 $2,000 $2,000 Income Statement as on June 30 April May June Qtr Total Sales $50,000 $60,000 $70,000 $180,000 Less; cost of Good Sold $25,000 $30,000 $35,000 $90,000 Gross Profit $25,000 $30,000 $35,000 $90,000 Opearting Expenses Rent $1,000 $1,000 $1,000 $3,000 Wages & salaries $26,000 $26,000 $26,000 $78,000 Utilities $1,000 $1,000 $1,000 $3,000 Depreciation $100 $100 $100 $300 Insurance $400 $400 $400 $1,200 Interest $250 $660 $720 $1,630 Opearting expenses $28,750 $29,160 $29,220 $87,130 Net Imcome ($3,750) $840 $5,780 $2,870 Balance Sheet as on June 30 Assets Current Assets Cash $2,000 Accounts Receivable $41,000 Inventory $108,000 Prepaid Insurance $800 Fixed Assets Fixtures 25000 Less: accumulated depreciation 300 24700 Total Assets $176,500 Liabilities & Stockholder Equity Current Liabilities Accounts Payable $59,000 Rent Payable $1,000 Interest Payable $1,630 Short Term Borrrowings $72,000 Stockholder Equity Common Shares 40000 Retained Earnings $2,870 Total Liabilities & Stockholder Equity $176,500 I have prepared assuming ending inventory is 120% of cost of sales as it is more logical Beacause if you see ending inventory of $30000 which is 120% of April COGS B Schedule of Expected Cash Collections April May June Total Feb March July Sales $50,000 $60,000 $70,000 $180,000 $50,000 40000 90000 For February sales $5,000 $5,000 For March Sales $16,000 $4,000 $20,000 For April sales $25,000 $20,000 $5,000 $50,000 For May sales $30,000 $24,000 $54,000 For June Sales $35,000 $35,000 Total A $46,000 $54,000 $64,000 $164,000 Accoumts Receivable (70000*50%+60000*10%) $41,000.0 a) Mercandise Purchase Budget April May June Total July Cost of Good sold 50% of sales $25,000 $30,000 $35,000 $90,000 45000 Closing Inventory 120%% of next month COGS $36,000 $42,000 $54,000 $132,000 Required Finished Goods $61,000 $72,000 $89,000 $222,000 Less: Beginning Inventory $30,000 $36,000 $42,000 $108,000 Required Purchases $31,000 $36,000 $47,000 $114,000 Accounts payable $47,000 Ending Inventory $54,000 2 b) Budgeted Cash Disbursement April May June Total 100% in next month $26,000 $31,000 $36,000 $57,000 Total Cash Disbursements for Purchases $26,000 $31,000 $36,000 $57,000 3 OPEARTING Expenses April May June Total Rent $1,000 $1,000 $1,000 $3,000 Wages & salaries $26,000 $26,000 $26,000 $78,000 Utilities $1,000 $1,000 $1,000 $3,000 Total $28,000 $28,000 $28,000 $84,000 April May June Total Beginning Cash balance 2000 $2,000 $2,000 2000 Add Cash Collection 46000 54000 64000 164000 Total cash available 48000 56000 66000 166000 Less: cash Disbursements Payment of Inventories $26,000 $31,000 $36,000 $57,000 Rent $1,000 $1,000 $1,000 $3,000 Wages & salaries $26,000 $26,000 $26,000 $78,000 Utilities $1,000 $1,000 $1,000 $3,000 Dividend Paid 17000 Total cash disbursement $71,000 $59,000 $64,000 $141,000 Excess of Surplus/( Deficiency) ($23,000) ($3,000) $2,000 ($24,000) Minimum Cash balance 2000 $2,000 $2,000 $2,000 Cash balance Availablebafter minimum balance ($25,000) ($5,000) $0 ($30,000) Borrowed/Repaid 25000 5000 0 $30,000 Repayment $0 Interest 0 0 $0 Cash Balance $0 $0 $0 $0 Closing Cash Balance (Minimum Balance+cash balance) $2,000 $2,000 $2,000 $2,000 Income Statement as on June 30 April May June Qtr Total Sales $50,000 $60,000 $70,000 $180,000 Less; cost of Good Sold $25,000 $30,000 $35,000 $90,000 Gross Profit $25,000 $30,000 $35,000 $90,000 Opearting Expenses Rent $1,000 $1,000 $1,000 $3,000 Wages & salaries $26,000 $26,000 $26,000 $78,000 Utilities $1,000 $1,000 $1,000 $3,000 Depreciation $100 $100 $100 $300 Insurance $400 $400 $400 $1,200 Interest $250 $300 $300 $850 Opearting expenses $28,750 $28,800 $28,800 $86,350 Net Imcome ($3,750) $1,200 $6,200 $3,650 Balance Sheet as on June 30 Assets Current Assets Cash $2,000 Accounts Receivable $41,000 Inventory $54,000 Prepaid Insurance $800 Fixed Assets Fixtures 25000 Less: accumulated depreciation 300 24700 Total Assets $122,500 Liabilities & Stockholder Equity Current Liabilities Accounts Payable $47,000 Rent Payable $1,000 Interest Payable $850 Short Term Borrrowings $30,000 Stockholder Equity Common Shares 40000 Retained Earnings $3,650 Total Liabilities & Stockholder Equity $122,500Related Questions
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