Problem 14-23 Preparing a master budget for retaIL COMPANY WITH NO BEGINNING ACCOUNT BALANCES.
cAMDEN cOMPANY IS A RETAIL COMPANY THAT SPECIALIZES IN SELLING OUTDOOR CAMPING EQUIPMENT. tHE COMPANY IS CONSIDERING OPENING A NEW STORE ON oCTOBER 1. The company president formed a planning committee to prepare a master budget for the first 3 months of operation. As budget coordinator, you have been assigned the following tasks.
Round all computations to the nearest whole dollar.
a. October sales are estimated to be $125,000, of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 8 percent per month. Prepare a sales budget.
b. The comapny expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. Prepare a schedule of cash receipts.
c. The cost of goods sold is 60 percent of sales. The company desire to maintain a minimum ending inventory equal to 10 percent of the next month's cost of goods sold. However, ending inventory of December is expected to be $6,000. Assume that all purchases are made on account. Prepare an inventory purchase budget.
d. The comapny pays 70 percent of accounts payable in the month of purchase and the remaining 30 percent in the following month. Prepare a cash payments budget for inventory purchases.
e. Budgeted selling and administrative expenses per month follow:
Salary expense (fixed) $9,000
Sales commissions 5% of sales
Supplies expense 2% of sales
Utilities (fixed) $700
Depreciation on store fixtures (fixed)* $2,000
Rent (fixed) $2,400
Miscellaneous (fixed) $600
*The capital expenditures budget indicates that Camden will spend $82,000 on Oct. 1 for store fixtures, which are expected to have a $10,000 salvage value and a three-year (36 month) useful life.
Use this information to prepare a selling and administrative expenses budget.
f. Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for the selling & administrative expenses.
g. Camden borrows funds, in increments of $1,000 and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. Ot pays interest of 1 percent per month in cash on the lst day of the month. To be prudent, the company desire to maintain a $6,000 cash cushion. Prepare a cash budget.
h.Prepare a pro forma income statement for the quarter.
i.Prepare a pro forma balance sheet at the end of the quarter.
Prepare a pro forma statement of cash flows for the quarter.
j.
Problem 14-23 Preparing a master budget for retaIL COMPANY WITH NO BEGINNING ACCOUNT BALANCES.
cAMDEN cOMPANY IS A RETAIL COMPANY THAT SPECIALIZES IN SELLING OUTDOOR CAMPING EQUIPMENT. tHE COMPANY IS CONSIDERING OPENING A NEW STORE ON oCTOBER 1. The company president formed a planning committee to prepare a master budget for the first 3 months of operation. As budget coordinator, you have been assigned the following tasks.
Round all computations to the nearest whole dollar.
a. October sales are estimated to be $125,000, of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 8 percent per month. Prepare a sales budget.
b. The comapny expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. Prepare a schedule of cash receipts.
c. The cost of goods sold is 60 percent of sales. The company desire to maintain a minimum ending inventory equal to 10 percent of the next month's cost of goods sold. However, ending inventory of December is expected to be $6,000. Assume that all purchases are made on account. Prepare an inventory purchase budget.
d. The comapny pays 70 percent of accounts payable in the month of purchase and the remaining 30 percent in the following month. Prepare a cash payments budget for inventory purchases.
e. Budgeted selling and administrative expenses per month follow:
Salary expense (fixed) $9,000
Sales commissions 5% of sales
Supplies expense 2% of sales
Utilities (fixed) $700
Depreciation on store fixtures (fixed)* $2,000
Rent (fixed) $2,400
Miscellaneous (fixed) $600
*The capital expenditures budget indicates that Camden will spend $82,000 on Oct. 1 for store fixtures, which are expected to have a $10,000 salvage value and a three-year (36 month) useful life.
Use this information to prepare a selling and administrative expenses budget.
f. Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for the selling & administrative expenses.
g. Camden borrows funds, in increments of $1,000 and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. Ot pays interest of 1 percent per month in cash on the lst day of the month. To be prudent, the company desire to maintain a $6,000 cash cushion. Prepare a cash budget.
h.Prepare a pro forma income statement for the quarter.
i.Prepare a pro forma balance sheet at the end of the quarter.
Prepare a pro forma statement of cash flows for the quarter.
j.
Related questions
Camden 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 are estimated to be $125,000, of which 40 percentwill be cash and 60 percent will be credit. The company expectssales to increase at the rate of 8 percent per month. Prepare asales budget.
The company expects to collect 100 percent of the accountsreceivable generated by credit sales in the month following thesale. Prepare a schedule of cash receipts.
The cost of goods sold is 60 percent of sales. The companydesires to maintain a minimum ending inventory equal to 10 percentof the next monthâs cost of goods sold. However, ending inventoryof December is expected to be $6,000. Assume that all purchases aremade on the account. Prepare an inventory purchases budget.
The company pays 70 percent of accounts payable in the month ofpurchase and the remaining 30 percent in the following month.Prepare a cash payments budget for inventory purchases.
Budgeted selling and administrative expenses per monthfollow:
| Salary expense(fixed) | $ | 9,000 | |
| Sales commissions | 5 | % of Sales | |
| Supplies Expense | 2 | % of Sales | |
| Utilities (fixed) | $ | 700 | |
| Depreciation on store fixtures(fixed)* | $ | 2,000 | |
| Rent (fixed) | $ | 2,400 | |
| Miscellaneous (fixed) | $ | 600 | |
*The capital expenditures budget indicates that Camden willspend $82,000 on October 1 for store fixtures, which are expectedto have a $10,000 salvage value and a three-year (36-month) usefullife.
Use this information to prepare a selling and administrativeexpenses budget.
Utilities and sales commissions are paid the month after theyare incurred; all other expenses are paid in the month in whichthey are incurred. Prepare a cash payments budget for selling andadministrative expenses.
Camden borrows funds, in increments of $1,000, and repays themon the last day of the month. Repayments may be made in any amountavailable. The company also pays its vendors on the last day of themonth. It pays interest of 1 percent per month in cash on the lastday of the month. To be prudent, the company desires to maintain a$6,000 cash cushion. Prepare a cash budget.
Camden 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:
Prepare a pro forma income statement for the quarter.
Prepare a pro forma balance sheet at the end of the quarter.
Prepare a pro forma statement of cash flows for the quarter.
Thornton 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 are estimated to be $400,000, of which 40 percentwill be cash and 60 percent will be credit. The company expectssales to increase at the rate of 30 percent per month. Prepare asales budget.
The company expects to collect 100 percent of the accountsreceivable generated by credit sales in the month following thesale. Prepare a schedule of cash receipts.
The cost of goods sold is 70 percent of sales. The companydesires to maintain a minimum ending inventory equal to 20 percentof the next monthâs cost of goods sold. However, ending inventoryof December is expected to be $13,500. Assume that all purchasesare made on account. Prepare an inventory purchases budget.
The company pays 70 percent of accounts payable in the month ofpurchase and the remaining 30 percent in the following month.Prepare a cash payments budget for inventory purchases.
Budgeted selling and administrative expenses per monthfollow:
| Salary expense (fixed) | $ | 19,500 | |
| Sales commissions | 4 | % of Sales | |
| Supplies expense | 2 | % of Sales | |
| Utilities (fixed) | $ | 2,900 | |
| Depreciation on store fixtures(fixed)* | $ | 5,500 | |
| Rent (fixed) | $ | 6,300 | |
| Miscellaneous (fixed) | $ | 2,700 | |
*The capital expenditures budget indicates that Thornton willspend $167,000 on October 1 for store fixtures, which are expectedto have a $35,000 salvage value and a two-year (24-month) usefullife.
Use this information to prepare a selling and administrativeexpenses budget.
Utilities and sales commissions are paid the month after theyare incurred; all other expenses are paid in the month in whichthey are incurred. Prepare a cash payments budget for selling andadministrative expenses.
Thornton borrows funds, in increments of $1,000, and repays themon the last day of the month. Repayments may be made in any amountavailable. The company also pays its vendors on the last day of themonth. It pays interest of 2 percent per month in cash on the lastday of the month. To be prudent, the company desires to maintain a$27,000 cash cushion. Prepare a cash budget.
Thornton 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:
Prepare a pro forma income statement for the quarter.
Prepare a pro forma balance sheet at the end of the quarter.
Prepare a pro forma statement of cash flows for the quarter.
