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Hammerly Corporation is preparing its m March 31. It sells a single product for $25 a unit. Budgeted sales are 40 credit. All credit sales are collected in the month following the four months follow: y Corporation is preparing its master budget for the quarter ending es are collected in the month following the sales, Budgeted sales for the next 1. Budgeted sales are 40% cash and 60% on Sales in Units ..... January 1,200 February March 1,000 1,600 April 1,400 At December 31, the balance in accounts receivable is $10,000, which represents the uncollected portion of December sales. The company desires merchandise inventory equal to 30% of the next month's sales in units. The December 31 balance of merchandise inventory is 340 units, and inventory cost is $10 per unit. Forty percent of the purchases are paid in the month of purchase and 60% are paid in the following month. At December 31, the balance of Accounts Payable is $8,000, which represents the unpaid portion of December's purchases. Operating expenses are paid in the month incurred and consist of: Sales commissions (10% of sales) Freight (2% of sales) Office salaries ($2,400 per month) Rent ($4,800 per month) Depreciation expense is $4,000 per month. The income tax rate is 40%, and income taxes will be paid on April 1. A minimum cash balance of $10,000 is required, and the cash balance at December 31 is $10,200. Loans are obtained at the end of a month in which a cash shortage occurs. Interest is 1% per month, based on the beginning of the month loan balance, and must be paid each month (The interest payment is rounded to the nearest whole dollar). If the ending cash balance exceeds the minimum, the excess will be applied to repaying any outstanding loan balance. At December 31, the loan balance is $0. Prepare a master budget (round all dollar amounts to the nearest whole dollar) for each of the months of January, February, and March that includes the: Sales budget - Schedule of cash receipts - Merchandise purchases budget Schedule of cash disbursements for merchandise purchases Schedule of cash disbursements for selling and administrative expenses Cash budget, including information on the loan balance MASTER BUDGET - FUC 1. SALES BUDGET Period 1 Period 2 Period 3 Period 4 PROJECTED UNIT SALES X SELLING PRICE PER UNIT - PROJECTED SALES 2. PURCHASES BUDGET Period 1 Period 2 Perlod 3 NEXT PERIOD'S UNIT SALES (use next month's data) X ENDING INVENTORY PERCENT =DESIRED ENDING INVENTORY BASED ON SALES + SAFETY STOCK =DESIRED ENDING INVENTORY**** + CURRENT PERIOD'S UNIT SALES (same as above) = UNITS TO BE AVAILABLE - BEGINNING INVENTORY = UNITS TO BE PURCHASED X BUDGETED COST PER UNIT = PROJECTED PURCHASES (used in payments schedule) BUDGET COST OF GOODS SOLD (used in Income stmt) CURRENT PERIOD'S UNIT SALES X BUDGETED COST PER UNIT = PROJECTED COST OF GOODS SOLD MATTEN BUDGET - FULL 3. SELLING EXPENSE BUDGET Period 1 Period 2 Perlod 3 BUDGET SALES X VARIABLE COSTS (as percent of sales) - VARIABLE SELLING EXPENSES + FIXED SELLING EXPENSES - PROJECTED SELLING EXPENSES (to inc. stmt & cash Budget) (Note: If fixed expenses are given as annual amount must convert to monthly amount 4. GENERAL AND ADMINISTRATIVE EXPENSE BUDGET Period 1 Period 2 Period 3 G & A EXPENSE 1 G & A EXPENSE 2 G & A EXPENSE 3 INTEREST EXPENSE (LONG TERM NOTES) - PROJECTED CASH G &A EXPENSES (to Cash Budget) DEPRECIATION EXPENSE (NONCASHI) PROJECTED G & A EXPENSES (to income stmt) 5. EXPECTED CASH RECEIPTS FROM CUSTOMERS Period 1 Period 2 Perlod 3 BUDGETED SALES ENDING ACCOUNTS RECEIVABLE CASH RECEIPTS CASH SALES COLLECTION OF RECEIVABLES (Balance) COLLECTION, Month of Sale COLLECTION, 1st Month After Sale COLLECTION, 2nd Month After Sale COLLECTION, 3rd Month After Sale TOTAL CASH TO BE COLLECTED (to cash budget) (Note: look for breakdown of given balances) in ASTER Bua ET-FULL Period 3 Period 2 6. EXPECTED CASH PAYMENTS TO SUPPLIERS Period 1 (Inventory purchases) Schedule 2 Info used here CASH PAYMENTS, Month of Purchase CASH PAYMENTS, 1st Month After Purchase CASH PAYMENTS, 2nd Month After Purchase TOTAL CASH PAYMENTS (to cash budget) 7. CASH BUDGET Period Period 1 Perlod 2 BEGINNING CASH ADD CASH RECEIPTS (SCH. 5) = CASH AVAILABLE (Line A) (A) CASH PAYMENTS PAYMENTS FOR MERCHANDISE (SCH. 6) PAYMENTS FOR SELLING EXPENSES (SCH. 3) PAYMENTS FOR ADMIN EXP EXCLUDING INTEREST (SCH. 4) PAYMENTS FOR INTEREST, LONG TERM NOTES (SCH. 4) DIVIDENDS CAPITAL EXPENDITURES(land, build,equip) INTEREST, SHORT TERM NOTES (8) TOTAL CASH PAYMENTS (Line B) PRELIMINARY BALANCE (EXCESS/SHORTFALL) (Line C) BORROWING REPAYMENT TOTAL FINANCING (Line D) ENDING CASH BALANCE (Line E) Ending Balance, Short Term Note Line C = Line A-Line B. Line E = Line C + Line D (E) MASTER BUDGET XSELLING PRICE PER UNIT 1. PURCHASES HEGET SEPESISITSLIES - DESIRED ENDING INVENTORY RANDON SALES SELLING EXPENSE BUDGET - URIARTE SELLINGENPENSES in Baton -PROJECTED SELLING EXPENSES (NoteIffled r e GENERAL AND ADMINISTRATIVEENPENSE BUDGET INTEREST EXPENSE LONG TERSIVOTES PROJECTED CASH GAEXPENSES Chapel SENPECTED CASH RECEIPTS FRANCUSTOMERS COLLECTION, Nathal Sale COLLEKTION. IM A TOTAL.CASH TO RE COLLECTED Kale & EXPECTEDCASH PAYNENTS TO SUPPLIERS every purchased tuled CESH PAIMENTS M erchas CASH PAYMENTS, Nether TOTAL CAR PAYMENTS T. CASH BUDGET PAYMENTS FOR MERCHANDISE SCHO PAYMENTS FOR SELLING EXPENESENCIL PAYMENTS FOR ADMIN FUPERCHING INTEREST CAPITAL EXPENDITURES PRELIMINARY BALANCECECESHORTFALL TOTAL FINANCING E) ENDINGCASH RATAVE Ending Short Term Net Ilar