Prepare a master budget for the three-month period ending June 30. Include the f
ID: 2462501 • Letter: P
Question
Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets:
A sales budget, by month and in total.
A schedule of expected cash collections from sales, by month and in total.
A merchandise purchases budget in units and in dollars. Show the budget by month and in total.
A schedule of expected cash disbursements for merchandise purchases, by month and in total.
A cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $50,000.
A budgeted income statement for the three-month period ending June 30. Use the contribution approach.
A budgeted balance sheet as of June 30.
//Comment: I know that this has been answered on chegg but I would really like to know how they got to the calculations of the solutions. How the problem was solved. Thanks in advance!
EARRINGS UNLIMITED Minimum ending cash balance $50,000 Selling price $10 Recent and forecast sales (in units): January (actual) 20,000 February (actual) 26,000 March (actual) 40,000 April 65,000 May 100,000 June 50,000 July 30,000 August 28,000 September 25,000 Desired ending inventories (percentage 40% of next month's sales) Cost of earrings $ 4 Purchases paid as follows: In month of purchase 50% In following month 50% Collection on sales: Sales collected current month 20% Sales collected following month 70% Sales collected 2nd month following 10% Variable monthly expenses: Sales commissions (% of sales) 4% Fixed monthly expenses: Advertising $ 200,000 Rent $ 18,000 Salaries $ 106,000 Utilities $ 7,000 Insurance (12 months paid in November) $ 3,000 Depreciation $ 14,000 Equipment purchased in May $ 16,000 Equipment purchased in June $ 40,000 Dividends declared each quarter $ 15,000 Balance sheet at March 31: Assets Cash $74,000 Accounts receivable 346,000 Inventory 104,000 Prepaid insurance 21,000 Property and equipment (net) 950,000 Total assets $1,495,000 Liabilities and Stockholders' Equity Accounts payable $100,000 Dividends payable 15,000 Capital stock 800,000 Retained earnings 580,000 Total liabilities and stockholders' equity $1,495,000 Agreement with Bank: Borrowing increments $1,000 Interest rate per month 1% Repayment increments $1,000 Total of interest paid each quarter 100% Required minimum cash balance$50,000
Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets:
A sales budget, by month and in total.
A schedule of expected cash collections from sales, by month and in total.
A merchandise purchases budget in units and in dollars. Show the budget by month and in total.
A schedule of expected cash disbursements for merchandise purchases, by month and in total.
A cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $50,000.
A budgeted income statement for the three-month period ending June 30. Use the contribution approach.
A budgeted balance sheet as of June 30.
//Comment: I know that this has been answered on chegg but I would really like to know how they got to the calculations of the solutions. How the problem was solved. Thanks in advance!
Explanation / Answer
Sales Budget
Purchase Budget
Budgeted cash disbursements for purchases
Cash Budget
INTEREST
36000*1%*3 => 1080, 70000 *1%* 2 => 1400
Total => 1080+ 1400 => 2480
Incoem statement
Particulars April May June Total Sales 65000 100000 50000 Unit Price 10 10 10 Sales ($) 650000 1000000 500000 2150000 Februray (10%) 26000 26000 March (70%) 280000 280000 April 130000 455000 65000 650000 May 200000 700000 900000 June 100000 100000 Total cash Collection 436000 655000 865000 1956000