Budget Project - Due Sunday, November 19, 2023

Henry Corporation prepares its master budget on a quarterly basis. The following data have been assembled to assist in the preparation of the master budget for the second quarter of 2019:

1. The company's gross profit rate is 40 percent of sales.
2. Actual sales for March and budgeted sales for the next four months are as follows:

March 2019 $170,000

April 2019 200,000

May 2019 250,000

June 2019 190,000

July 2019 150,000

1. Sales are 20 percent for cash and the rest on account. All sales on account are collected the month following sale. The accounts receivable on March 31 are a result of March credit sales.
2. At the end of each month, inventory is to be on hand equal to 30 percent of the following month's sales needs, stated at cost.
3. Thirty-five percent of a month's inventory purchases are paid for in the month of purchase; the rest is paid for in the following month.
4. Monthly expenses are budgeted as follows: property taxes, $8,000 per month; salaries and wages, $18,000 per month; depreciation, $17,000 per month; advertising, 4 percent of sales; utilities, $12,000 per month; other expenses, 5 percent of sales
5. The company will declare and pay $20,000 in cash dividends per month.
6. During April, the company will purchase a new computer for $12,000 in cash. During May, other equipment will be purchased for cash at a cost of $10,000. During June, another computer will be purchased for $12,000.
7. As of March 31, 2019 (the end of the prior quarter), the company's general ledger showed the following account balances:

Debits Credits

Cash $10,000 Accounts Receivable 43,000

Inventory 45,000

Plant and Equip (net) 117,000

Accounts Payable $46,000

Short-term Notes Payable 15,000

Capital Stock 95,000

Retained earnings 59,000

$215,000 $215,000

1. The company must maintain a minimum cash balance of $8,000. An open line of credit is available at a local bank for any borrowing that may be needed during the quarter. All borrowing is done at the beginning of a month, and all repayments are made at the end. Borrowings and repayments of principal must be in multiples of $1,000. Interest is paid at the end of each month. The interest rate is 12 percent per annum. (Figure interest in whole months, e.g., 1/12, 2/12.)

Required:

Prepare an interactive budgeting spreadsheet. It should automatically update when changes are made to the input data, such as changes in sales forecasts, equipment purchases, etc.

Spreadsheets Hints

1. Create a worksheet for inputs that includes all potential variables that can be changed. Label the worksheet tab as "inputs."
2. Create a worksheet for each of the different budgets. Label the tabs appropriately. The following budgets should be included:
   1. Sales Budget
   2. Inventory Purchases Budget
   3. Selling and Administrative Budget
   4. Cash Collections from Customers Schedule
   5. Cash Paid for Inventory Purchases Schedule
   6. Cash Budget
   7. Budgeted Income Statement
   8. Budgeted Balance Sheet
3. Each budget should:
   1. be on a separate worksheet
   2. have a heading centered over the rest of the budget that includes the following:
4. Name of Company
5. Name of Budget
6. Date: June 30, 2019 or For the Quarter ended June 30, 2019
7. be prepared on the monthly basis with a total column for the quarter. The budgeted income statement and budgeted balance sheet should be quarterly (not monthly).
8. All worksheets should be interactive (i.e. all worksheet pages except the Input worksheet, should be formula-driven).

Hints for Creating Interactive Cash Budget

1. To calculate borrowings to the nearest thousands, you may use the ROUNDUP function.
2. To calculate repayments, you may use the ROUNDDOWN function.