Question

Baird Company is a retail company that specializes in sellingoutdoor camping equipment. The company is considering opening a newstore on October 1, 2019. The company president formed a planningcommittee to prepare a master budget for the first three months ofoperation. As budget coordinator, you have been assigned thefollowing tasks:

Required

October sales areestimated to be $300,000, of which 40 percent will be cash and 60percent will be credit. The company expects sales to increase atthe rate of 20 percent per month. Prepare a sales budget.

The company expects tocollect 100 percent of the accounts receivable generated by creditsales in the month following the sale. Prepare a schedule of cashreceipts.

The cost of goods soldis 70 percent of sales. The company desires to maintain a minimumending inventory equal to 20 percent of the next month’s cost ofgoods sold. However, ending inventory of December is expected to be$12,100. Assume that all purchases are made on account. Prepare aninventory purchases budget.

The company pays 80percent of accounts payable in the month of purchase and theremaining 20 percent in the following month. Prepare a cashpayments budget for inventory purchases.

Budgeted selling andadministrative expenses per month follow:

Salary expense(fixed)	$	18,100
Salescommissions		4	% of Sales
Suppliesexpense		2	% of Sales
Utilities(fixed)	$	1,500
Depreciation onstore fixtures (fixed)*	$	4,100
Rent(fixed)	$	4,900
Miscellaneous(fixed)	$	1,300

*The capital expenditures budget indicates that Baird will spend$119,400 on October 1 for store fixtures, which are expected tohave a $21,000 salvage value and a two-year (24-month) usefullife.

Use this informationto prepare a selling and administrative expenses budget.

Utilities and salescommissions are paid the month after they are incurred; all otherexpenses are paid in the month in which they are incurred. Preparea cash payments budget for selling and administrative expenses.

Baird borrows funds,in increments of $1,000, and repays them on the last day of themonth. Repayments may be made in any amount available. The companyalso pays its vendors on the last day of the month. It paysinterest of 2 percent per month in cash on the last day of themonth. To be prudent, the company desires to maintain a $13,000cash cushion. Prepare a cash budget.

October sales areestimated to be $300,000, of which 40 percent will be cash and 60percent will be credit. The company expects sales to increase atthe rate of 20 percent per month. Prepare a sales budget.

	October	November	December
Sales Budget
Cash sales
Sales on account
Total budgeted sales

The company expects tocollect 100 percent of the accounts receivable generated by creditsales in the month following the sale. Prepare a schedule of cashreceipts.

	October	November	December
Schedule of Cash Receipts
Current cash sales
Plus collections from A/R
Total collections

The cost of goods soldis 70 percent of sales. The company desires to maintain a minimumending inventory equal to 20 percent of the next month’s cost ofgoods sold. However, ending inventory of December is expected to be$12,100. Assume that all purchases are made on account. Prepare aninventory purchases budget.

	October	November	December
Inventory Purchases Budget
Inventory needed
Required purchases (onaccount)

The company pays 80percent of accounts payable in the month of purchase and theremaining 20 percent in the following month. Prepare a cashpayments budget for inventory purchases. (Round your final answersto the nearest whole dollar amounts.)

	October	November	December
Schedule of Cash Payments Budgetfor Inventory Purchases
Payment of current month'saccounts payable
Payment for prior month'saccounts payable
Total budgeted payments forinventory

Prepare a selling andadministrative expenses budget.

	October	November	December
Selling and AdministrativeExpense Budget
Salary expense
Sales commissions
Supplies expense
Utilities
Depreciation on storefixtures
Rent
Miscellaneous
Total S&A expenses

Utilities and salescommissions are paid the month after they are incurred; all otherexpenses are paid in the month in which they are incurred. Preparea cash payments budget for selling and administrative expenses.

	October	November	December
Schedule of Cash Payments forS&A Expenses
Salary expense
Sales commissions
Supplies expense
Utilities
Depreciation on storefixtures
Rent
Miscellaneous
Total payments for S&Aexpenses

Baird borrows funds,in increments of $1,000, and repays them on the last day of themonth. Repayments may be made in any amount available. The companyalso pays its vendors on the last day of the month. It paysinterest of 2 percent per month in cash on the last day of themonth. To be prudent, the company desires to maintain a $13,000cash cushion. Prepare a cash budget. (Any repayments/shortage whichshould be indicated with a minus sign.)

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Cash Budget
	October	November	December
Cash available
Less: Payments
Total budgeted payments
Payments minus receipts
Financing activity