Question
a. Sales Budget October November December Total-Qtr Cash sales Sales on account Total budgeted sales b. Schedule of Cash Receipts October November December Total-Qtr Current
a. Sales Budget | October | November | December | Total-Qtr |
Cash sales | ||||
Sales on account | ||||
Total budgeted sales |
b. Schedule of Cash Receipts | October | November | December | Total-Qtr |
Current cash sales | ||||
Plus collections from A/R | ||||
Total collections |
The cost of goods sold is 80 percent of sales. The company desires to maintain a minimum ending inventory equal to 30 percent of the next months cost of goods sold. (Ending inventory for December is based on budgeted January Year2 sales.)
Assume that all inventory purchases are made on account (on credit). The company pays 20 percent of accounts payable in the month of purchase and the remaining amount in the following month.
In excel, prepare an inventory purchases budget and a cash payments budget for inventory purchases. Use the check figures below before you continue.
c. Inventory Purchases Budget | October | November | December | Total-Qtr |
Budgeted cost of goods sold | ||||
Plus desired ending inventory | ||||
Inventory needed | ||||
Less beginning inventory | ||||
Required purchases (on account) |
d. Cash payments for inventory | October | November | December | Total-Qtr |
Payment of current month's A/P | ||||
Payment for prior month's A/P | ||||
Total budgeted payments |
Budgeted selling and administrative expenses per month follow.
Salary expense (fixed): $ 21500
Sales commissions: 3 percent of Sales
Supplies expense: 1 percent of Sales
Utilities (fixed): $2300
Depreciation on store equipment (fixed)*: You compute
Rent (fixed) $ 8000
Miscellaneous (fixed): $ 1250
*The capital expenditures budget indicates that the company will spend $450000 on October 1 for store fixtures, which are expected to have a $48000 residual value and a 48 month useful life.
Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred.
In excel, prepare the selling and administrative expenses budget and the cash payments budget for selling and administrative expenses. Check the key figures below.
e. Selling and Admin.Expense Budget | October | November | December | Total-Qtr |
Salary expense | ||||
Sales commissions | ||||
Supplies expense | ||||
Utilities | ||||
Depreciation on store fixtures | ||||
Rent | ||||
Miscellaneous | ||||
Total S&A expenses |
f. Cash payments for S&A | October | November | December | Total-Qtr |
Salary expense | ||||
Sales commissions | ||||
Supplies expense | ||||
Utilities | ||||
Depreciation on store fixtures | ||||
Rent | ||||
Miscellaneous | ||||
Total payments for S&A expenses |
Choice issued stock for 300000 on October 5. A dividend of $40000 was paid on December 15.
The company borrows and repays funds in increments of $1,000 on the last day of the month. The company also pays its vendors on the last day of the month. It pays interest of 1percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $10000 cash cushion.
Prepare a cash budget on your excel template. Check key figure below.
g. Cash Budget | October | November | December | Total-Qtr |
Beginning cash balance | ||||
Issuance of stock | ||||
Collections from customers | ||||
Cash available | ||||
Less payments | ||||
For inventory purchases | ||||
For S&A expenses | ||||
Purchase of store fixtures | ||||
Pay dividend | ||||
Interest expense | ||||
Total budgeted payments | ||||
Cash balance before borrow/repay | ||||
Financing activity | ||||
Borrowing (repayment) | ||||
Ending cash balance |
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