Problem 7-26A Completing a Master Budget [LO2, LO4, LO7, LO8, LO9, LO10] Nordic
ID: 2492175 • Letter: P
Question
Problem 7-26A Completing a Master Budget [LO2, LO4, LO7, LO8, LO9, LO10]
Nordic Company, a merchandising company, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of the master budget for the second quarter.
As of March 31 (the end of the prior quarter), the company’s balance sheet showed the following account balances:
Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following the sale. The accounts receivable at March 31 are a result of March credit sales.
Monthly selling and administrative expenses are budgeted as follows: salaries and wages, $9,500 per month; shipping, 5% of sales; advertising, $6,200 per month; other expenses, 4% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $6,000 for the quarter.
Half of a month’s inventory purchases are paid for in the month of purchase and half in the following month.
Equipment purchases during the quarter will be as follows: April, $12,500; and May, $6,000.
Management wants to maintain a minimum cash balance of $8,000. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $20,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.
Merchandise purchases budget. (Input all amounts as positive values.)
Schedule of expected cash disbursements for merchandise purchases: (Leave no cells blank - be certain to enter "0" wherever required.)
Schedule of expected cash disbursements for selling and administrative expenses:
Cash budget. (Input all amounts as positive values except cash deficiency, repayments and interest which should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Total Financing should be indicated with a minus sign when the company is repaying amounts that were previously borrowed.)
Prepare an absorption costing income statement for the quarter ending June 30. (Input all amounts as positive values.)
Prepare a balance sheet as of June 30. (Be sure to list the assets and liabilities in order of their liquidity.)
Nordic Company, a merchandising company, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of the master budget for the second quarter.
Explanation / Answer
Answer 1. Schedule of expected cash collections April May June Total Sales 82,000 92,000 97,000 271,000 Cash sales 16,400 18,400 19,400 54,200 Credit sales 49,600 65,600 73,600 188,800 Total collections 66,000 84,000 93,000 243,000 Answer 2a. Merchandise purchases budget April May June Total Budgeted cost of goods sold 49,200 55,200 58,200 162,600 Add: desired ending inventory 16,560 17,460 9,360 43,380 Total needs 65,760 72,660 67,560 205,980 Deduct: beginning inventory (14,760) (16,560) (17,460) (48,780) Required purchases 51,000 56,100 50,100 157,200 Answer 2b. Schedule of cash disbursements for purchases April May June Total For March purchases 20,400 - - 20,400 For April purchases 25,500 25,500 - 51,000 For May purchases - 28,050 28,050 56,100 For June purchases - - 25,050 25,050 Total cash disbursements for purchases 45,900 53,550 53,100 152,550 Answer 3. Schedule of cash disbursements for selling and administrative expenses April May June Total Salaries and wages 9,500 9,500 9,500 28,500 Shipping 4,100 4,600 4,850 13,550 Advertising 6,200 6,200 6,200 18,600 Other expenses 3,280 3,680 3,880 10,840 - Total cash disbursements for selling & admn. Exp. 23,080 23,980 24,430 71,490 Answer 4. Nordic Company Cash budget April May June Total Cash balance, beginning 12,000 8,520 8,990 12,000 Add cash collections 66,000 84,000 93,000 243,000 Total cash available 78,000 92,520 101,990 255,000 Less cash disbursements: For inventory purchases 45,900 53,550 53,100 152,550 For selling and administrative expenses 23,080 23,980 24,430 71,490 For equipment purchases 12,500 6,000 - 18,500 For dividends - - 3,500 3,500 Total cash disbursements 81,480 83,530 81,030 246,040 Excess (deficiency) of cash (3,480) 8,990 20,960 8,960 Financing: Borrowings 12,000 - - 12,000 Repayments - - (12,000) (12,000) Interest - - (360) (360) Total financing 12,000 - (12,360) (360) Cash balance, ending 8,520 8,990 8,600 8,600 As per Chegg Guidelines, You can ask only one question at a time having four subparts. For other parts or Questions please ask it again.