Baird Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2019. The company president formed a planning committee to prepare a master budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks:

Problem 14-23 Part 1

Required

October sales are estimated to be $300,000, of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 20 percent per month. Prepare a sales budget.

The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. Prepare a schedule of cash receipts.

The cost of goods sold is 70 percent of sales. The company desires to maintain a minimum ending inventory equal to 20 percent of the next months cost of goods sold. However, ending inventory of December is expected to be $12,100. Assume that all purchases are made on account. Prepare an inventory purchases budget.

The company pays 80 percent of accounts payable in the month of purchase and the remaining 20 percent in the following month. Prepare a cash payments budget for inventory purchases.

Budgeted selling and administrative expenses per month follow:

Salary expense (fixed)	$	18,100
Sales commissions		4	% of Sales
Supplies expense		2	% of Sales
Utilities (fixed)	$	1,500
Depreciation on store fixtures (fixed)*	$	4,100
Rent (fixed)	$	4,900
Miscellaneous (fixed)	$	1,300

*The capital expenditures budget indicates that Baird will spend $119,400 on October 1 for store fixtures, which are expected to have a $21,000 salvage value and a two-year (24-month) useful life.

Use this information to prepare a selling and administrative expenses budget.

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. Prepare a cash payments budget for selling and administrative expenses.

Baird borrows funds, in increments of $1,000, and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. It pays interest of 2 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $13,000 cash cushion. Prepare a cash budget.

Baird borrows funds, in increments of $1,000, and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. It pays interest of 2 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $13,000 cash cushion. Prepare a cash budget. (Any repayments/shortage which should be indicated with a minus sign.)

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Cash Budget
	October	November	December
Beginning cash balanceselected answer correct	$53,000selected answer incorrect		$(286,436)
Add: Cash receiptsselected answer correct	120,000selected answer correct	264,000selected answer incorrect	316,800selected answer incorrect
Cash available	173,000	264,000	30,364
Less: Payments
For inventory purchasesselected answer correct	127,680selected answer incorrect	225,456selected answer incorrect	329,008selected answer incorrect
For selling and administrative expensesselected answer correct	30,300selected answer correct	45,000selected answer correct	48,840selected answer correct
Purchase of store fixturesselected answer correct	119,400selected answer correct	not attempted	not attempted
not attempted	277,380selected answer incorrect	270,456selected answer incorrect	377,848selected answer incorrect
Borrowing (repayment)selected answer incorrect	(104,308)selected answer incorrect	7,164selected answer incorrect	(47,244)selected answer incorrect
Total budgeted payments	450,452	548,076	708,452
Payments minus receipts
not attempted	(277,452)	(284,076)	(678,088)
Financing activity
Interest expenseselected answer incorrect	not attempted	(2,360)selected answer incorrect	(11,360)selected answer incorrect
Ending cash balanceselected answer correct	$(277,452)	$(286,436)	$(689,448)

The company pays 80 percent of accounts payable in the month of purchase and the remaining 20 percent in the following month. Prepare a cash payments budget for inventory purchases. (Round your final answers to the nearest whole dollar amounts.)

	October	November	December
Schedule of Cash Payments Budget for Inventory Purchases
Payment of current month's accounts payable	$264,000selected answer incorrect	$262,080selected answer incorrect	$254,020selected answer incorrect
Payment for prior month's accounts payable	not attempted	31,920selected answer incorrect	48,384selected answer incorrect
Total budgeted payments for inventory	$264,000	$294,000	$302,404