Near the end of 2017, the management of Ballixter Boxing Co., a merchandising co
ID: 2587679 • Letter: N
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Near the end of 2017, the management of Ballixter Boxing Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2017 BALLIXTER BOXING COMPANY Estimated Balance Sheet December 31, 2017 Liabilities and Equity $37,000 Accounts payable 520,000 Bank loan payable 100,000 Taxes payable (due 657,000 Total liabilities Accounts receivable Total current assets $457,000 Common stock Less accumulated depreciation 476,875 Retained earnings 6 Total stockholders'equity $1.133,875 Total liabilities and equity $1.133,875 To prepare a master budget for January, February, and March of 2018, management gathers the following information. a. Ballixter Boxing's single product is purchased for S20 per unit and resold for S55 per unit. The expected inventory level of 5,000 units on December 31, 2017, is more than management's desired level for 2018, which is 20% of the next month's expected sales (in units). Expected sales are: January, 7.500 units. February, 9,000 units: March, 11,000 units; and April, 10,000 units. b. Cash sales and credit sales represent 25% and 75%, respectively, of total sales. Of the credit sales, 68% is collected in the first month after the month of sale and 32% in the second month after the month of sale. For the December 31, 2017, accounts receivable balance, $125,000 is collected in January and the remaining $395,000 is collected in February c. Merchandise purchases are paid for as follows: 20% in the first month after the month of purchase and 80% in the second month after the month of purchase. For the December 3, 2017, accounts payable balance, $85,000 is paid in January and the remaining $265,000 is paid in February S96,000 per year paid in cash. d. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are e. General and administrative salaries are S156,000 per year. Maintenance expense equals $2,100 per month and is f. Equipment reported in the December 31, 2017, balance sheet was purchased in January 2017. I is being depreciated over eight years under the straight-line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter: January, $35,000, February, $97,000; and March, $29,000. This equipment will be depreciated under the straight-line method over eight years with no salvage value. A full month's depreciation is taken for the month in which equipment is purchased. g. The company plans to acquire land at the end of March at a cost of $180,000, which will be paid with cash on the last day of the month. h. Ballixter Boxing has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and interest is paid at each month-end based on the beginning balance. Partial or full payments on these loans can be made on the last day of the month. The company has agreed to maintain a minimum ending cash balance of$23,365 in each month i. The income tax rate for the company is 32%. Income taxes on the first quarter's income will not be paid untilExplanation / Answer
Answer 1. Monthly Sales Budget Jan Feb March Total Sales in Units 7,500 9,000 11,000 27,500 Selling Price Per Unit 55 55 55 55 Sales in $ 412,500 495,000 605,000 1,512,500 Cash Sales - 25% 103,125 123,750 151,250 378,125 Credit Sales - 75% 309,375 371,250 453,750 1,134,375 Schedule of Expected Cash Collections from Sales Jan Feb March Total Cash Sales 103,125 123,750 151,250 378,125 Collection from Accounts Receivables Dec Accounts recevables 125,000 395,000 520,000 Jan Sales 210,375 99,000 309,375 Feb Sales 252,450 252,450 Total cash Collections 228,125 729,125 502,700 1,459,950 Answer 2. Monthly Merchandise Purchase Budget Jan Feb March Total Sales in Units 7,500 9,000 11,000 27,500 Add: Ending Inventory -20% 1,800 2,200 2,000 2,000 Total Needs 9,300 11,200 13,000 29,500 Less: Beginning Inventory in units (5,000) (1,800) (2,200) (5,000) Required Purchases in Units 4,300 9,400 10,800 24,500 Purchase Cost per Unit 20 20 20 20 Desired Purchases 86,000 188,000 216,000 490,000 Schedule of Cash payments to Suppliers Jan Feb March Total Cash Payment Accounts Payable - Dec 85,000 265,000 - 350,000 Jan Purchases - 17,200 68,800 86,000 Feb Purchases - - 37,600 37,600 Total Cash Payment to Suppliers 85,000 282,200 106,400 473,600 Answer 3. Monthly Selling Expenses Budget Jan Feb March Total Sales Commission - 20% of Sales 82,500 99,000 121,000 302,500 Sales Salaries 96,000 96,000 96,000 288,000 Total Selling Expenses 178,500 195,000 217,000 590,500 Schedule of Cash payments to Selling Expenses Jan Feb March Total Sales Commission - 20% of Sales 82,500 99,000 121,000 302,500 Sales Salaries 96,000 96,000 96,000 288,000 Total Cash Paid for Selling Expenses 178,500 195,000 217,000 590,500 Answer 4. Monthly General & Adminstrative Expense Budget Jan Feb March Total General & Admn. Salaries 13,000 13,000 13,000 39,000 Maintenance Expenses 2,100 2,100 2,100 6,300 Depreciation Expenses 6,042 7,052 7,354 20,448 Total General & Admn. Expenses 21,142 22,152 22,454 65,748 Depreciation Expenses Jan Feb March Old Equipment 5,677 5,677 5,677 Equipment - Purchased in Jan 365 365 365 Equipment - Purchased in Feb - 1,010 1,010 Equipment - Purchased in Mar - - 302 Total Depreciation Charged 6,042 7,052 7,354 Schedule of Cash payments of Selling & Admn. Budget Jan Feb March Total General & Admn. Salaries 13,000 13,000 13,000 39,000 Maintenance Expenses 2,100 2,100 2,100 6,300 - Total 15,100 15,100 15,100 45,300
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