Problem 7-8AA Merchandising: Preparation of a complete master budget LO P4 Near
ID: 2594850 • Letter: P
Question
Problem 7-8AA Merchandising: Preparation of a complete master budget LO P4 Near the end of 2017, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2017 DIMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2017 Assets $36,000 520,000 110,000 Cash Accounts receivable Inventory Total current assets Equipment Less: accumulated depreciation $ 666, 000 588,000 73,500 Equipment, net Total assets 514,500 $ 1,180,500 Liabilities and Equity Accounts payable Bank loan payable Taxes payable (due 3/15/2018) Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and equity $ 355,000 16,000 89,000 $460,000 472,000 248,500 720,500 $1,180,500 To prepare a master budget for January, February, and March of 2018, management gathers the following informationExplanation / Answer
Cash budget Month Jan Feb Mar Beginning balance (A) 36000 44440 291800 Add:Receipt from customers (Note:1) 201200 711920 504560 Total cash available(B) 237200 756360 796360 Less:Cash payment for Merchandise (Note:2) 75000 294200 94800 Purchase of land 165000 Maintenance expense 2000 2000 2000 General & administrative salaries (132000/12) 11000 11000 11000 Interest on bank loan 160 (16000*12%*1/12) Taxes payable 89000 Purchase of equipment 38400 96000 21600 Sales salaries (60000/12) 5000 5000 5000 Sales commission 81200 100800 128800 (406000*20%) (504000*20%) (644000*20%) Total cash payments © 212760 509000 517200 preliminary cash balance (A+B-C) 60440 291800 570960 Additional loan (loan repayment) -16000 0 0 Ending balance 44440 291800 570960 Notes: 1. Receipt from customers: Schedule of expected cash collections: Jan Feb Mar April Expected sales (in units) 7250 9000 11500 9000 ($) ($) ($) ($) Selling price per unit 56 56 56 56 Total sales 406000 504000 644000 504000 Cash sales (20%) …….a 81200 100800 128800 Sales on account (80%) 324800 403200 515200 Beginning accounts receivable-collection…b 120000 400000 Jan credit sales collection……c 211120 113680 (324800*65%) (324800*35%) Feb credit sales collection…..d 262080 (403200*65%) Total cash collection (a+b+c+d) 201200 711920 504560 2 Payment for merchandise Month Jan Feb Mar Estimated unit sales 7250 9000 11500 Add:Ending inventory 1800 2300 1800 (20% of next month sale) (9000*20%) (11500*20%) (9000*20%) Total production required (A)+(B) 9050 11300 13300 Less:Beginning inventory 5500 1800 2300 Products to be purchased 3550 9500 11000 ($) ($) ($) Purchase price per unit 20 20 20 Total purchase price 71000 190000 220000 Beginning accounts payable-payment…a 75000 280000 Jan credit purchase payment……b 14200 56800 (71000*20%) (71000*80%) Feb credit purchase payment…..c 38000 (190000*20%) Total payment (a+b+c+d) 75000 294200 94800 Loan balance Jan Feb Mar Loan balance-Beginning of month 16000 0 0 Additional loan (loan repayment) -16000 0 0 Loan balance-End of month 0 0 0