BUS $54200$

MASTER BUDGET PROJECT

FIRST COMPONENT $2023$

Data: Forester Company, a camping gear merchandising firm, 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

third quarter of $2023.$

a$.$ On June $30,2023,$ the company prepared the following balance sheet:

b$.$ Sales for June $2023$ were $$500,000.$ Budgeted sales for July $2022$ through October $2023$ are as

follows:

July $..............................................$ $$600,000$

August $................................700,000$

September $.............................800,000$

October $..............................600,000$

July

$$600,000$

August $.......................................................700,000$

September $....................................800,000$

October $........................................600,000$

c$.$ Sales are $30\%$ for cash and $70\%$ on credit. $50\%$ of each month's credit sales are collected in

the month of sale and the remaining $50\%$ is collected in the month after sale; there are no un$-$

collectible accounts anticipated. The accounts receivable balance of $$175,000$ on June $30,2023$

is the result of June credit sales to be paid in July $($ $$500,000$ June sales x $70\%$ credit sales x $50\%$

to be collected in the month after sale$).$

d$.$ The company's budgeted cost of goods sold is $55\%$ of budgeted sales.

e$.$ Monthly expenses are budgeted as follows: salaries and wages, $$50,000$ per month plus $20\%$ of

sales; shipping, $2\%$ of sales; advertising, $$12,500$ per month; and depreciation, $$2,500$ per month.

f$.$ At the end of each month, management desires inventory on hand to be equal to $15\%$ of the

following month's sales, stated at cost$.$

g$.$ Inventory purchases are all on credit. $40\%$ of each month's purchases are paid for in the month

of purchase and the remaining $60\%$ is paid for in the month after purchase. The accounts payable

balance of $$110,000$ on June $30,2023$ is the result of June purchases to be paid in July $($ $$500,000$

June sales x $55\%$ cost of goods sold ratio $60\%$ to be paid in the month after sale$).$

h$.$ Land purchases during the quarter will be as follows: July, $$180,000$; September, $$191,008.$

i$.$ Dividends totaling $$25,000$ will be declared and paid in September.

j$.$ The company wants to maintain a minimum cash balance of $$100,000.$ An open line of credit is

available at a local bank. All borrowing is done at the beginning of the month and all repay$-$ments

of principal are made at the end of a month. Interest is repaid only at the time of repayment of

principal and is accrued between the time the borrowing is made and the principal is repaid. The

annual interest rate is $12\%$ and interest is calculated to the nearest whole month $($e$.$g$.,\frac{1}{12},\frac{2}{12},$

etc.$).$