[The following information applies to the questions displayed below.] Beech Corporation is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The companyâs balance sheet as of June 30th is shown below:
Beech Corporation
Balance Sheet
June 30 Assets Cash $ 92,000 Accounts receivable 130,000 Inventory 48,600 Plant and equipment, net of depreciation 216,000 Total assets $ 486,600 Liabilities and Stockholdersâ Equity Accounts payable $ 77,000 Common stock 329,000 Retained earnings 80,600 Total liabilities and stockholdersâ equity $ 486,600
rev: 09_17_2014_QC_54310
7.
value:
3.12 points
Required information
Beechâs managers have made the following additional assumptions and estimates:
1. Estimated sales for July, August, September, and October will be $270,000, $290,000, $280,000, and $300,000, respectively.
2. All sales are on credit and all credit sales are collected. Each monthâs credit sales are collected 35% in the month of sale and 65% in the month following the sale. All of the accounts receivable at June 30 will be collected in July.
3. Each monthâs ending inventory must equal 30% of the cost of next monthâs sales. The cost of goods sold is 60% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at June 30 will be paid in July.
4. Monthly selling and administrative expenses are always $50,000. Each month $5,000 of this total amount is depreciation expense and the remaining $45,000 relates to expenses that are paid in the month they are incurred.
5. The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30.
Required:
1. Prepare a schedule of expected cash collections for July, August, and September. Also compute total cash collections for the quarter ended September 30.
2-a. Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30.
2-b. Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September. Also compute total cash disbursements for merchandise purchases for the quarter ended September 30.
3. Prepare an income statement for the quarter ended September 30.
4. Prepare a balance sheet as of September 30.
rev: 09_17_2014_QC_54310
References
eBook & Resources
WorksheetLearning Objective: 08-02 Prepare a sales budget, including a schedule of expected cash collections.Learning Objective: 08-09 Prepare a budgeted income statement.
Difficulty: 1 EasyLearning Objective: 08-04 Prepare a direct materials budget, including a schedule of expected cash disbursements for purchases of materials.Learning Objective: 08-10 Prepare a budgeted balance sheet.
Check my work
8.
value:
3.16 points
Required information
Beechâs managers have made the following additional assumptions and estimates:
1. Estimated sales for July, August, September, and October will be $270,000, $290,000, $280,000, and $300,000, respectively.
2. All sales are on credit and all credit sales are collected. Each monthâs credit sales are collected 45% in the month of sale and 55% in the month following the sale. All of the accounts receivable at June 30 will be collected in July.
3. Each monthâs ending inventory must equal 20% of the cost of next monthâs sales. The cost of goods sold is 60% of sales. The company pays for 30% of its merchandise purchases in the month of the purchase and the remaining 70% in the month following the purchase. All of the accounts payable at June 30 will be paid in July.
4. Monthly selling and administrative expenses are always $50,000. Each month $5,000 of this total amount is depreciation expense and the remaining $45,000 relates to expenses that are paid in the month they are incurred.
5. The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30.
Required:
1. Prepare a schedule of expected cash collections for July, August, and September. Also compute total cash collections for the quarter ended September 30.
2-a. Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30.
2-b. Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September. Also compute total cash disbursements for merchandise purchases for the quarter ended September 30.
3. Prepare an income statement for the quarter ended September 30.
4. Prepare a balance sheet as of September 30.
.
| [The following information applies to the questions displayed below.] |
| Beech Corporation is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The companyâs balance sheet as of June 30th is shown below: |
| Beech Corporation Balance Sheet June 30 | |
| Assets | |
| Cash | $ 92,000 |
| Accounts receivable | 130,000 |
| Inventory | 48,600 |
| Plant and equipment, net of depreciation | 216,000 |
| Total assets | $ 486,600 |
| Liabilities and Stockholdersâ Equity | |
| Accounts payable | $ 77,000 |
| Common stock | 329,000 |
| Retained earnings | 80,600 |
| Total liabilities and stockholdersâ equity | $ 486,600 |
rev: 09_17_2014_QC_54310
7.
value:
3.12 points
Required information
| Beechâs managers have made the following additional assumptions and estimates: |
| 1. | Estimated sales for July, August, September, and October will be $270,000, $290,000, $280,000, and $300,000, respectively. |
| 2. | All sales are on credit and all credit sales are collected. Each monthâs credit sales are collected 35% in the month of sale and 65% in the month following the sale. All of the accounts receivable at June 30 will be collected in July. |
| 3. | Each monthâs ending inventory must equal 30% of the cost of next monthâs sales. The cost of goods sold is 60% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at June 30 will be paid in July. |
| 4. | Monthly selling and administrative expenses are always $50,000. Each month $5,000 of this total amount is depreciation expense and the remaining $45,000 relates to expenses that are paid in the month they are incurred. |
| 5. | The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30. |
| Required: |
| 1. | Prepare a schedule of expected cash collections for July, August, and September. Also compute total cash collections for the quarter ended September 30. |
| 2-a. | Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30. |
| 2-b. | Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September. Also compute total cash disbursements for merchandise purchases for the quarter ended September 30. |
| 3. | Prepare an income statement for the quarter ended September 30. |
| 4. | Prepare a balance sheet as of September 30. |
rev: 09_17_2014_QC_54310
References
eBook & Resources
WorksheetLearning Objective: 08-02 Prepare a sales budget, including a schedule of expected cash collections.Learning Objective: 08-09 Prepare a budgeted income statement.
Difficulty: 1 EasyLearning Objective: 08-04 Prepare a direct materials budget, including a schedule of expected cash disbursements for purchases of materials.Learning Objective: 08-10 Prepare a budgeted balance sheet.
Check my work
8.
value:
3.16 points
Required information
| Beechâs managers have made the following additional assumptions and estimates: |
| 1. | Estimated sales for July, August, September, and October will be $270,000, $290,000, $280,000, and $300,000, respectively. |
| 2. | All sales are on credit and all credit sales are collected. Each monthâs credit sales are collected 45% in the month of sale and 55% in the month following the sale. All of the accounts receivable at June 30 will be collected in July. |
| 3. | Each monthâs ending inventory must equal 20% of the cost of next monthâs sales. The cost of goods sold is 60% of sales. The company pays for 30% of its merchandise purchases in the month of the purchase and the remaining 70% in the month following the purchase. All of the accounts payable at June 30 will be paid in July. |
| 4. | Monthly selling and administrative expenses are always $50,000. Each month $5,000 of this total amount is depreciation expense and the remaining $45,000 relates to expenses that are paid in the month they are incurred. |
| 5. | The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30. |
| Required: |
| 1. | Prepare a schedule of expected cash collections for July, August, and September. Also compute total cash collections for the quarter ended September 30. |
| 2-a. | Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30. |
| 2-b. | Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September. Also compute total cash disbursements for merchandise purchases for the quarter ended September 30. |
| 3. | Prepare an income statement for the quarter ended September 30. |
| 4. | Prepare a balance sheet as of September 30. |
.
Related questions
Near the end of 2013, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2013.
| DIMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2013 | |||||
| Assets | |||||
| Cash | $ | 36,000 | |||
| Accounts receivable | 520,000 | ||||
| Inventory | 105,000 | ||||
| Total current assets | 661,000 | ||||
| Equipment | $ | 539,000 | |||
| Less accumulated depreciation | 67,375 | ||||
| Equipment, net | 471,625 | ||||
| Total assets | $ | 1,132,625 | |||
| Liabilities and Equity | |||||
| Accounts payable | $ | 370,000 | |||
| Bank loan payable | 15,000 | ||||
| Taxes payable (due 3/15/2014) | 89,000 | ||||
| Total liabilities | $ | 474,000 | |||
| Common stock | 473,000 | ||||
| Retained earnings | 185,625 | ||||
| Total stockholdersâ equity | 658,625 | ||||
| Total liabilities and equity | $ | 1,132,625 | |||
| To prepare a master budget for January, February, and March of 2014, management gathers the following information. |
| a. | Dimsdale Sportsâ single product is purchased for $20 per unit and resold for $55 per unit. The expected inventory level of 5,250 units on December 31, 2013, is more than managementâs desired level for 2014, which is 20% of the next monthâs expected sales (in units). Expected sales are: January, 6,500 units; February, 9,100 units; March, 11,250 units; and April, 9,500 units. |
| b. | Cash sales and credit sales represent 20% and 80%, respectively, of total sales. Of the credit sales, 57% is collected in the first month after the month of sale and 43% in the second month after the month of sale. For the December 31, 2013, 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 31, 2013, accounts payable balance, $80,000 is paid in January and the remaining $290,000 is paid in February. |
| d. | Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $90,000 per year. |
| e. | General and administrative salaries are $156,000 per year. Maintenance expense equals $2,000 per month and is paid in cash. |
| f. | Equipment reported in the December 31, 2013, balance sheet was purchased in January 2013. It 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 monthâs 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 $150,000, which will be paid with cash on the last day of the month. |
| h. | Dimsdale Sports 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 $8,350 in each month. |
| i. | The income tax rate for the company is 43%. Income taxes on the first quarterâs income will not be paid until April 15. |
| Required: | ||||||
| Prepare a master budget for each of the first three months of 2014; include component budgets for the following areas:
|
Near the end of 2013, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2013.
| DIMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2013 | |||||
| Assets | |||||
| Cash | $ | 36,000 | |||
| Accounts receivable | 520,000 | ||||
| Inventory | 105,000 | ||||
| Total current assets | 661,000 | ||||
| Equipment | $ | 539,000 | |||
| Less accumulated depreciation | 67,375 | ||||
| Equipment, net | 471,625 | ||||
| Total assets | $ | 1,132,625 | |||
| Liabilities and Equity | |||||
| Accounts payable | $ | 370,000 | |||
| Bank loan payable | 15,000 | ||||
| Taxes payable (due 3/15/2014) | 89,000 | ||||
| Total liabilities | $ | 474,000 | |||
| Common stock | 473,000 | ||||
| Retained earnings | 185,625 | ||||
| Total stockholdersâ equity | 658,625 | ||||
| Total liabilities and equity | $ | 1,132,625 | |||
| To prepare a master budget for January, February, and March of 2014, management gathers the following information. |
| a. | Dimsdale Sportsâ single product is purchased for $20 per unit and resold for $55 per unit. The expected inventory level of 5,250 units on December 31, 2013, is more than managementâs desired level for 2014, which is 20% of the next monthâs expected sales (in units). Expected sales are: January, 6,500 units; February, 9,100 units; March, 11,250 units; and April, 9,500 units. |
| b. | Cash sales and credit sales represent 20% and 80%, respectively, of total sales. Of the credit sales, 57% is collected in the first month after the month of sale and 43% in the second month after the month of sale. For the December 31, 2013, 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 31, 2013, accounts payable balance, $80,000 is paid in January and the remaining $290,000 is paid in February. |
| d. | Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $90,000 per year. |
| e. | General and administrative salaries are $156,000 per year. Maintenance expense equals $2,000 per month and is paid in cash. |
| f. | Equipment reported in the December 31, 2013, balance sheet was purchased in January 2013. It 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 monthâs 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 $150,000, which will be paid with cash on the last day of the month. |
| h. | Dimsdale Sports 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 $8,350 in each month. |
| i. | The income tax rate for the company is 43%. Income taxes on the first quarterâs income will not be paid until April 15. |
| Required: | ||
| Prepare a master budget for each of the first three months of 2014; include the following component budgets: (PLEASE INCLUDE ALL PERTINENT INFORMATION FOR INFO LISTED BELOW)
|
Case 8-31 Master Budget with Supporting Schedules [LO8-2, LO8-4, LO8-8, LO8-9, LO8-10]
| You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. |
| Since you are well trained in budgeting, you have decided to prepare comprehensive budgets for the upcoming second quarter in order to show management the benefits that can be gained from an integrated budgeting program. To this end, you have worked with accounting and other areas to gather the information assembled below. |
| The company sells many styles of earrings, but all are sold for the same priceâ$15 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings): |
| January (actual) | 21,800 | June (budget) | 51,800 |
| February (actual) | 27,800 | July (budget) | 31,800 |
| March (actual) | 41,800 | August (budget) | 29,800 |
| April (budget) | 66,800 | September (budget) | 26,800 |
| May (budget) | 101,800 | ||
| The concentration of sales before and during May is due to Motherâs Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month. |
| Suppliers are paid $4.9 for a pair of earrings. One-half of a monthâs purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however, that only 20% of a monthâs sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible. |
| Monthly operating expenses for the company are given below: |
| Variable: | |||
| Sales commissions | 4% | of sales | |
| Fixed: | |||
| Advertising | $ | 290,000 | |
| Rent | $ | 27,000 | |
| Salaries | $ | 124,000 | |
| Utilities | $ | 11,500 | |
| Insurance | $ | 3,900 | |
| Depreciation | $ | 23,000 | |
| Insurance is paid on an annual basis, in November of each year. |
| The company plans to purchase $20,500 in new equipment during May and $49,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $21,750 each quarter, payable in the first month of the following quarter. |
| A listing of the companyâs ledger accounts as of March 31 is given below: |
| Assets | ||
| Cash | $ | 83,000 |
| Accounts receivable ($41,700 February sales; $501,600 March sales) | 543,300 | |
| Inventory | 130,928 | |
| Prepaid insurance | 25,500 | |
| Property and equipment (net) | 1,040,000 | |
| Total assets | $ | 1,822,728 |
| Liabilities and Stockholdersâ Equity | ||
| Accounts payable | $ | 109,000 |
| Dividends payable | 21,750 | |
| Common stock | 980,000 | |
| Retained earnings | 711,978 | |
| Total liabilities and stockholdersâ equity | $ | 1,822,728 |
| The company maintains a minimum cash balance of $59,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month. |
| The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $59,000 in cash. |
| Required: | |
| 1. | Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets: |
| a. | A sales budget, by month and in total. |
| b. | A schedule of expected cash collections from sales, by month and in total. |
| c. | A merchandise purchases budget in units and in dollars. Show the budget by month and in total. (Round unit cost of purchases to 1 decimal place.) |
| d. | A schedule of expected cash disbursements for merchandise purchases, by month and in total. |
| 2. | A cash budget. Show the budget by month and in total. (Cash deficiency, repayments and interest should be indicated by a minus sign.) |
| 3. | A budgeted income statement for the three-month period ending June 30. Use the contribution approach. |
| 4. | A budgeted balance sheet as of June 30. |
