Dils Brother Department Store prepares budgets quarterly. The following informat

Question

Dils Brother Department Store prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for 2017.

   Accounts payable

   Dividends payable

   Rent payable

   Stockholders' equity

   Total liabilities and equity

Actual and forecasted sales for selected months in 2017 are as follows:

Monthly operating expenses are as follows:

Cash dividends of $15,000 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 cost of 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 $4,000 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, 2017.

(b) Prepare a cash receipts schedule for each month of the second quarter ending June 30, 2017. Do not include borrowings.

(c) Prepare a cash disbursements schedule for each month of the second quarter ending June 30, 2017. Do not include repayments of borrowings.

(d) Prepare a cash budget for each month of the second quarter ending June 30, 2017. Include budgeted borrowings and repayments.

Only use negative signs, if needed, for: excess receipts over disbursements, balance before borrowings and cash balances (beginning and ending).

(e) Prepare an income statement for each month of the second quarter ending June 30, 2017.

Only use negative signs to show net losses for income.

(f) Prepare a budgeted balance sheet as of June 30, 2017.

Dils Brother Department Store
Balance Sheet
March 31, 2017 Assets    Liabilities and Stockholders' Equity Cash $ 4,000

   Accounts payable

$31,000 Accounts receivable 31,000

   Dividends payable

15,000 Inventory 36,000

   Rent payable

3,000 Prepaid Insurance 3,000

   Stockholders' equity

50,000 Fixtures 25,000 Total assets $99,000

   Total liabilities and equity

$99,000

Explanation / Answer

a. Purchases budget

b. Schedule of cash receipts

c. Budgeted cash disbursements

d. Cash budget

e. Income Statement

April May June Total Cost of goods sold $30000 $35000 $40000 $105000 Add ending inventory 42000 48000 60000 150000 Less beginning inventory -36000 -42000 -48000 -126000 Budgeted purchases $36000 $41000 $52000 $129000

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