Required: Prepare a master budget for Bobcat Boutique for the second quarter of
ID: 2566811 • Letter: R
Question
Required: Prepare a master budget for Bobcat Boutique for the second quarter of 2016. The following component budgets must be included:
Schedule of Expected Cash Collections
Schedule of Expected Cash Disbursements - Merchandise Purchases
Schedule of Expected Cash Disbursements - Operating Expenses
Combined Cash Budget
Budgeted Balance Sheet
Bobcat Boutique is a merchandising business located downtown in San Marcos, Texas. The owners are Texas State alumni and they would like to maximize their profits. They understand that accurate budgeting will help obtain this goal. The company is completing its second year of operations and is preparing to build its master budget for the second quarter. The budget will detail each quarter’s activity and the total for the quarter. The master budget will be based on the following information:
Sales were budgeted at $50,000 for September. Expected sales are $60,000 for October, $72,000 for November, $90,000 for December, and $48,000 for January.
The gross margin is 25% of sales.
Sales are projected to be 60% for cash and 40% on credit. Credit sales are collected in the month following the sale. The September accounts receivable are a result of the September credit sales. There are no bad debts.
Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold.
Merchandise Inventory Purchases are paid as follows; 50% of a month’s inventory purchases is paid for in the month of purchase; the other 50% is paid for in the following month. The accounts payable at September 31 are the result of September purchases of inventory.
Monthly operating expenses are as follows: commissions are 12% of sales; rent is $2,500 per month, other operating expenses (excluding depreciation) are 6% of sales. Assume these expenses are paid monthly. Deprecation is $900 per month.
Equipment costing $1,500 will be purchased for cash in October.
Income tax is estimated to be 28% of operating income. Estimated taxes are accrued each month and paid in cash in the last month of the quarter.
Management would like to maintain a minimum cash balance of at least $3,000 at the end of each month. The boutique has an agreement with a local bank that allows them to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $20,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. They would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.
The balance sheet as of September 31, is as follows:
Assets
September 31
Cash
$8,000
Accounts Receivable
20,000
Inventory
36,000
Plant & Equipment, net
120,000
Total assets
$184,000
Liabilities & Equity
Accounts Payable
$21,750
Retained Earnings
162,250
Total liabilities & equity
$184,000
Assets
September 31
Cash
$8,000
Accounts Receivable
20,000
Inventory
36,000
Plant & Equipment, net
120,000
Total assets
$184,000
Liabilities & Equity
Accounts Payable
$21,750
Retained Earnings
162,250
Total liabilities & equity
$184,000
Explanation / Answer
Schedule of Expected Cash Collections :
Merchandise Purchases Budget :
Schedule of Expected Cash Disbursements : Merchandise Purchases
Schedule of Expected Cash Disbursements : Operating Expenses
Bobcat Boutique
Cash Budget
For the quarter ended December 31
Bobcat Boutique
Budgeted Income Statement
For the quarter ended December 31
Bobcat Boutiques
Budgeted Balance Sheet
December 31
October November December Quarter $ $ $ $ Cash Sales 36,000 43,200 54,000 133,200 Accounts Receivable : September 20,000 20,000 Accounts Receivable : October 24,000 24,000 Accounts Receivable : November 28,800 28,800 Totals 56,000 67,200 82,800 206,000Related Questions
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