Required information Problem 14-23 Preparing a master budget for retail company
ID: 2546336 • Letter: R
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Required information
Problem 14-23 Preparing a master budget for retail company with no beginning account balances LO 14-2, 14-3, 14-4, 14-5, 14-6
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Munoz Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2019. The company president formed a planning committee to prepare a master budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks:
Problem 14-23 Part 1
Required
October sales are estimated to be $340,000, of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 20 percent per month. Prepare a sales budget.
The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. Prepare a schedule of cash receipts.
The cost of goods sold is 70 percent of sales. The company desires to maintain a minimum ending inventory equal to 20 percent of the next month’s cost of goods sold. However, ending inventory of December is expected to be $12,900. Assume that all purchases are made on account. Prepare an inventory purchases budget.
The company pays 70 percent of accounts payable in the month of purchase and the remaining 30 percent in the following month. Prepare a cash payments budget for inventory purchases.
Budgeted selling and administrative expenses per month follow:
*The capital expenditures budget indicates that Munoz will spend $146,600 on October 1 for store fixtures, which are expected to have a $29,000 salvage value and a two-year (24-month) useful life.
Use this information to prepare a selling and administrative expenses budget.
Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for selling and administrative expenses.
Munoz borrows funds, in increments of $1,000, and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. It pays interest of 2 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $21,000 cash cushion. Prepare a cash budget.
Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for selling and administrative expenses.
Salary expense (fixed) $ 18,900 Sales commissions 4 % of Sales Supplies expense 2 % of Sales Utilities (fixed) $ 2,300 Depreciation on store fixtures (fixed)* $ 4,900 Rent (fixed) $ 5,700 Miscellaneous (fixed) $ 2,100Explanation / Answer
Schedule of cash payments S&A expenses October November December Total Salary expense 18900 18900 18900 56700 Sales commissions (4% of sales) 0 13600 16320 29920 Supplies expense (2% of sales) 6800 8160 9792 24752 Utilities 0 2300 2300 4600 Rent 4900 4900 4900 14700 Miscellaneous 2100 2100 2100 6300 Total S & A expenses 32700 49960 54312 136972 Cash Budget October November December Total Beginning cash balance 0 21174 21419 0 Add: Collections 136000 367200 440640 943840 Total cash available 136000 388374 462059 943840 Cash disbursements: For purchases 206584 296453 290060 793097 For S& A expenses 32700 49960 54312 136972 For Capital expenditure 146000 146000 For interest 542 542 502 1586 Total cash disbursements 385826 346955 344874 1077655 Cash Surplus / (Deficit) -249826 41419 117185 -133815 Minimum cash balance 21000 21000 21000 21000 Excess / (Shortage) -270826 20419 96185 -154815 Financing: Borrowing 271000 271000 Repayments -20000 -96000 -116000 Total Financing 271000 -20000 -96000 155000 Ending Cash Balance 21174 21419 21185 21185
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