Project: Completing a Master BudgetThe following data relate to the operations of O’Nelio Corp, a wholesale distributor of consumer goods:Current Assets as of March 31:CashAccounts ReceivableInventoryBuildings & Equipment, netAccounts PayableCapital StockRetained Earningsa. Gross Margin percentage:7,00039,00010,080108,18034,125100,00030,13530% of sales70% (i.e. this percentage is COGS)b. Actual and budgeted sales data are as follows:March (actual)65,000April72,000May78,000June84,000July64,000c.Sales are:40% cash60% creditCredit sales are collected in the month following sale. The accounts receivable at March 31 are the result of Marchcredit sales.d. Each month’s ending inventory should equal:20% of the following month’s budgeted COGS.e.25% of a month’s inv purchases are paid in the month of purch.75% are paid in the following month.f. Monthly expenses are as follows (paid monthly):Commissions12,000Rent2,000Other expenses (excluding depr)9% of salesDepreciation per month:900 (includes new assets purchased this quarter)g. Equipment will be acquired for cash:AprilMay60008200h. Management would like to maintain a minimum cash balance of $5000 at the end of each month. The companyhas an agreement with a local bank that allows the company to borrow in increments of $1000 at the beginning ofeach month, up to a total loan balance of $50,000. The interest rate on these loans is 18% annually, and forsimplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loanplus accumulated interest at the end of the quarter.Schedule of Expected Cash CollectionsAprilCash SalesCredit SalesTotal CollectionsMayJuneQuarterMerchandise Purchases BudgetAprilMayJuneQuarterBudgeted COGSAdd desired End InvTotal NeedsLess Beg InvRequired Purchases*Budgeted COGS is calculated by taking the sales multiplied by the %that is COGS. As an example, if the gross margin percentage is 60%, thatmeans that 40% of the revenue is COGS. If sales are 200,000, then budgetedCOGS would be 200,000 * 40% = 80,000Example:RevenueLess COGSGross Margin200,00080,000120,00040%60%Schedule of Expected Cash Disbursements – Merchandise PurchasesAprilMarch purchasesApril purchasesMay purchasesJune purchasesTotal DisbursementsMayJuneQuarterSchedule of Expected Cash Disbursements – Selling & Admin ExpensesAprilMayJuneQuarterCommissionsRentOther ExpensesTotal disbursements**Donâ€™t include depreciation in here because it is only cash disbursements.Cash Budget: ending cash check figure: 5145AprilMayJuneQuarterCash Balance, beginningAdd cash collectionsTotal cash availableLess cash disbursements:For InventoryFor Operating expensesFor EquipmentTotal Cash DisbursementsExcess (deficiency) of cashFinancing:BorrowingsRepaymentsInterestCash Balance, endingHINT: we will have to borrow some during June as well, to keep our balance above 5000â€¦We WILL NOT pay any interest on that borrowing that we make in June until next quarter.20(see sample on page 356 of textbook)–you will have to calculate COGSNet Income Check figure: 4050(see sample on page 358 of textbook) Check Figure: Total Assets = 184,185
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