Best-Sell Inc. is a retail company that sells electronics. The Controller of Best-Sell is in the process of preparing a monthly budget for the first quarter in 2014. She collected the following information:

Sales Information:

Sales Forecasts: Best-Sells general manager of marketing has recently completed a sales forecast. She believes that the companys sales during the first quarter of 2014 will increase by 10% each month over the previous months sale. The sales level is expected to remain constant at the March level during the second quarter of 2014.

The company makes both cash sales and credit sales. Credit sales typically constitute 75% of total sales. Best-Sells credit experience indicates that 10% of the credit sales are collected during the month of sale and the remainder is collected during the following month.

Projected sales revenue for December 2013 is $400,000.

Inventory Information

Best-Sells Cost of Goods Sold generally runs at 70% of sales.

Inventory is purchased on account 40% of each months purchases are paid during the month of purchase. The remainder is paid during the following month.

Each month Best-Sell keeps its ending inventory equal to half of the next months projected value of inventory to be sold (i.e., expected cost of goods sold).

Other monthly operating expenses

Sales salary $21,000

Administrative salary $21,000

Advertising and Marketing $16,000

Depreciation $25,000

Interest on bonds ** $ 2,500

Property taxes*** $ 900

Sales Commission 1% of Sales revenue

** The company has $300,000 long-term bonds with 10% interest and 6-year maturity. It makes semi-annual interest payment for the bonds on January 31 and July 31 each year.

*** The company pays the property taxes semiannually on February 28 and August 31 each year.

Problem 2 - Continued

Financing Activity Information

Best-Sell distributes $50,000 cash dividends to the shareholders on the last day of each quarter.

Information from the Projected Balance Sheet as of December 31, 2013

Cash $ 35,000

Bonds Payable (10%, due in 2016) $ 300,000

Property taxes payable $ 3,600

Bond interest payable $ 15,000

Required: Using the information provided above, prepare the following monthly budgets for the first quarter in 2014:

Prepare Sales Budget.

Prepare Inventory Purchase Budget.

Prepare Cash Receipt Budgets.

Prepare Cash Disbursement Budgets.

Problem 2 - Continued

Sales Budget

	Dec. 2013	Jan. 2014	Feb. 2014	Mar. 2014	1ST QTR 2014
Total Sales
Credit Sales
Cash Sales

Purchase Budget

	Dec. 2013	Jan. 2014	Feb. 2014	Mar. 2014	1ST QTR 2014
Cost of Goods Sold
Add) End. Inventory
Total goods required
Less) Beg. Inventory
Purchase required

Cash Receipt Budget

	Jan. 2014	Feb. 2014	Mar. 2014	1ST QTR 2014
Cash Sales
Cash collection from credit sales
Preceding month
Current month
Total Cash Receipts

Cash Disbursement Budget

	Jan. 2014	Feb. 2014	Mar. 2014	1ST QTR 2014
Cash payment for inventory
Previous month
Current month
Total cash payment for inventory
Other cash payment
1)
2)
3)
4)
5)
6)
7)
Total other cash payment
Total Cash Disbursement