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ACCT 2302 Managerial Accounting

Master Budget Project

A. Information to be used in preparation of master budget:

Ryan Richards, controller for Grange Retailers, has assembled the following data to assist

in the preparation of a cash budget for the third quarter of 2016:

a. Sales:

May (actual)

$100,000

June (actual)

120,000

July (estimated)

90,000

August (estimated)

100,000

September (estimated)

135,000

October (estimated)

110,000

b. Each month, 30 percent of sales are for cash and 70 percent are on credit. The

collection pattern for credit sales is 20 percent in the month of sale, 50 percent in

the following month, and 30 percent in the second month following the sale.

c. Each month, the ending inventory exactly equals 50 percent of the cost of next

months sales. The markup on goods is 25 percent of cost.

d. Inventory purchases are paid for in the month following the purchase.

e. Recurring monthly expenses are as follows:

Salaries and wages

$10,000

Depreciation on plant and equipment

4,000

Utilities

1,000

Other

1,700

f. Property taxes of $15,000 are due and payable on July 15, 2016.

g. Advertising fees of $6,000 must be paid on August 20, 2016.

h. A lease on a new storage facility is scheduled to begin on September 2, 2016.

Monthly payments are $5,000.

i. The company has a policy to maintain a minimum cash balance of $10,000. If

necessary, it will borrow to meet its short-term needs. All borrowing is done at

the beginning of the month. All payments on principal and interest are made at

the end of a month. The annual interest rate is 9 percent. The company must

borrow in multiples of $1,000.

j. A partially completed balance sheet as of June 30, 2016, follows. (Accounts

payable is for inventory purchases only.)

Cash

$ ?

Accounts receivable

?

Inventory

?

Plant and equipment

425,000

Accounts payable

$ ?

Common stock

210,000

Retained earnings

________

268,750

Total

$ ?

$ ?

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B. Requirements

1. Complete the balance sheet given in item j.

2. Prepare a cash budget for each month in the third quarter and for the quarter in

total (the third quarter begins on July 1). Provide a supporting schedule of cash

collections.

3. Prepare a pro-forma balance sheet as of September 30, 2016.

4. Provide 3 different ways in which the company may increase net income. In

fulfilling this requirement, you should use as many concepts from the course as

possible, identify and explain each concept used, and provide pro-forma excel

spreadsheets to support your recommendations