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Developing a Master Budget for a Merchandising Organization Peyton Department Store prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for 2010 PEYTON DEPARTMENT STORE Balance Sheet March 31, 2010 Assets Liabilities and Stockholders' Equity Cash $200U Accounts payable $20.000 Accounts receivabe 25 COU Dincends payable 17 UUD Inventory 30 COD Rent arabic 1000 Prepaid insurance 2.con Stoerelders muy 40.000 Fixtures 25.000 Tula $84.00 Totallitelitian ly $84000 Actual and forecasted sales for selected months in 2010 are as follows: Month Sales Revenue January 0.000 50.000 March Apri SUCU May CU.OCU June 70.000 90.00 August 80.000 Monthly operating expenses are as follows: Wages and salaries $27,050 Doriton 100 Utilities 1,000 Rent 1,000 Cash dividends of $17,000 are declared during the third month of each quarter and are paid during the first month of the following quarter. Operating expenses, except insurance, rent, and depreciation are paid as incurred. Rent is paid during the following math. The prepaid insurance is for five more months. Cost of goods sold is equal to 50 percent of sales. Ending inventories are sufficient for 120 percent of the next month's sales. Purchases during any given month are paid in full during the following month. All sales are on account with 50 percent collected during the month of sale, 40 percent during the next month, and 10 percent during the month thereafter. Money can be borrowed and repaid in multiples of $1,000 at an interest rate of 12 percent per year. The company desires a minimum cash balance of $2,000 on the first of each month. At the time the principal is repaid interest is paid on the portion of principal that is repaid. All borrowing is at the beginning of the month, and all repayment is at the end of the month. Money is never repaid at the end of the manth it is borrowed, (a) Prepare a purchases budget for each month of the second quarter ending June 30, 2010. Peyton Department Store Monthly Purchase Budget Quarter Ending June 30, 2010 April May June Total Budgeted purchases $ 31,000 $ 36,000 $ 47,000 $ 114,000 (b) Prepare a cash receipts schedule for each month of the second quarter ending June 30, 2010. Do not include borrowings. Peyton Department Store Schedule of Monthly Cash Receipts Quarter Ending June 30, 2010 April May June Total Total cash receipts $ 46,000 $ 54,000 $ 64,000 $ 164,000 (c) Prepare a cash disbursements schedule for each month of the second quarter ending June 30, 2010. Do not include repayments of borrowings. Peyton Department Store Schedule of Monthly Cash Disbursements Quarter Ending June 30, 2010 April May June Total Total cash disbursements $ 72,000 $ 60,000 $ 65,000 $ 197,000 (d) Prepare a cash budget for each month of the second quarter ending June 30, 2010. Include budgeted borrowings and repayments. Only use negative signs, if needed, for: excess receipts over disbursements, balance before borrowings and cash balances (beginning and ending). Peyton Department Store Monthly Cash Budget Quarter Ending June 30, 2010 April May June Total Cash balance, beginning $ 2,000 $ 2,000 $ 2,000 $ 2,000 Receipts 46,000 54,000 64,000 164,000 Disbursements 60,000 65,000 197,000 Excess receipts over disb. (26,000) (6,000) (1,000) (33,000) Balance before borrowings (24,000) (4,000) 1,000 (27,000) x Borrowings 26,000 6,000 1,000 33,000 Loan repayments 0 0 0 Cash balance, ending $ 2,000$ 2,000 $ 2,000 $ 2,000 72,000 (e) Prepare an income statement for each month of the second quarter ending June 30, 2010. Only use negative signs to show net losses in income. Peyton Department Store Budgeted Monthly Income Statements Quarter Ending June 30, 2010 April May June 50,000 $ 60,000 $ 70,000 $ 25,000 30,000 35,000 25,000 30,000 35,000 Total 180,000 Sales $ Cost of sales 90,000 90,000 27,000 27,000 27,000 Gross profit Operating expenses: Wages and salaries Depreciation Utilities Rent 81,000 300 100 100 100 1,000 3,000 1,000 1,000 1,000 1,000 1,000 3,000 Insurance 400 400 400 1,200 Interest 270 x 340 x 630 x 29,770 X Total expenses Net income 29,840 x 160 * $ 30,130 x 4,870 * $ 1,240 x 89,740 x 260 x $ (4,770) * $ (f) Prepare a budgeted balance sheet as of June 30, 2010. Assets Cash $ Accounts receivable Peyton Department Store Budgeted Balance Sheet June 30, 2010 Liabilities and Equity 2,000 Merchandise payable $ 0 x 25,000 x Dividend payable 17,000 30,000 x Rent payable 1,000 2,000 x Loans payable OX 25,000 x Interest payable 0 x 84,000 Stockholders' equity 40,000 x Total liab. & equity $ 84,000 x Inventory Prepaid insurance Fixtures Total assets $