PROBLEM 8–26 Completing a Master Budget [LO2, LO4, LO7, LO8, LO9, LO10] The following data relate…

PROBLEM 8–26 Completing a Master Budget [LO2, LO4, LO7, LO8, LO9, LO10]

The following data relate to the operations of Picanuy Corporation, a wholesale distributor of consumer goods:

 

 

a.       The gross margin is 30% of sales. (In other words, cost of goods sold is 70% of sales.)

b.       Actual and budgeted sales data are as follows:

 

 

c.        Sales are 40% for cash and 60% on credit. Credit sales are collected in the month following sale. The accounts receivable at December 31 are the result of December credit sales.

d.       Each month’s ending inventory should equal 20% of the following month’s budgeted cost of goods sold.

e.        One-quarter of a month’s inventory purchases is paid for in the month of purchase; the other three-quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory.

f.        Monthly expenses are as follows: commissions, $12,000; rent, $1,800; other expenses (exclud- ing depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is

$2,400 for the quarter and includes depreciation on new assets acquired during the quarter.

g.        Equipment will be acquired for cash: $3,000 in January and $8,000 in February.

h.       Management would like to maintain a minimum cash balance of $5,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $50,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that inter- est is not compounded. The company would, as far as it is able, repay the loan plus accumu- lated interest at the end of the quarter.

Required:

Using the data above:

1.       Complete the following schedule:

 

 

 

January

 

February

 

March

 

Quarter

Cash sales . . . . . . . . . .

$28,000

 

 

 

 

 

 

Credit sales . . . . . . . . . .

  36,000

 

             

 

 

 

 

Total collections . . . . . . .

$64,000

 

 

 

 

 

 

 

 

 

 

2.       Complete the following:

 

 

 

3.       Complete the following schedule:

 

 

 

January

 

February

 

March

 

 

Quarter Commissions . . . . . . . . . . . . . . . . . . . . .            $12,000

Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 1,800

Other expenses  . . . . . . . . . . . . . . . . . . .            5,600

   

 

            

   

 

            

 

 

 

Total disbursements . . . . . . . . . . . . . . . .           $19,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

4.  

Complete the following cash budget:

 

 

 

 

 

 

 

  Cash Budget

January

   

February

   

March

 

   

Quarter

  Cash balance, beginning  . . . . . . . . . . . .          $ 6,000

Add cash collections . . . . . . . . . . . . . . . .         64,000

   

          

 

 

Total cash available . . . . . . . . . . . . . . . .           70,000

 

          

  Less cash disbursements:

For inventory . . . . . . . . . . . . . . . . . . . .             45,150

For operating expenses . . . . . . . . . . . .         19,400 For equipment . . . . . . . . . . . . . . . . .  .            3,000

   

 

 

          

 

Total cash disbursements . . . . . . . . . . . .         67,550

 

 

 

Excess (deficiency) of cash . . . . . . . . . . .            2,450

 

 

 

 

 

5.       Prepare an absorption costing income statement, similar to the one shown in Schedule 9 in the chapter, for the quarter ended March 31.

6.       Prepare a balance sheet as of March 31.

 

"Is this question part of your assignment? We can help"

ORDER NOW

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *