| Choice is a retail company that sells specialized gardening products. The company is considering opening a new store on October 1, Year1. As budget coordinator, you have been asked to prepare a master budget for the first 3 months of the companys operation. You have gathered the following information: | October sales are estimated to be $280000 of which 60 percent will be cash and the remainder will be on credit. The company expects all sales to increase at the rate of 25 percent per month for November and December. Sales in January Year 2 are expected to be $250000. | The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. | Prepare a sales budget and a schedule of cash receipts using these facts and your excel template. Check your answers here before moving to the next part, by completing the cells requested in the chart below. | Sales Budget | October | November | December | Total-Qtr | | Cash sales | 168,000 | 210,000 | 262,500 | 640,500 | | Sales on account | 112,000 | 140,000 | 175,000 | 175,000 | | Total budgeted sales | 280,000 | 350,000 | 437,500 | 1,067,500 | | | | | | | | | | | | | | Schedule of Cash Receipts | October | November | December | Total-Qtr | | Current cash sales | 168,000 | 210,000 | 262,500 | 640,500 | | Plus collections from A/R | - | 112,000 | 140,000 | 252,000 | | Total collections | 168,000 | 322,000 | 402,500 | 892,500 | | | | | | | | | | | | | | | | | | | | Inventory Purchases Budget | October | November | December | Total-Qtr | | Budgeted cost of goods sold | 224,000 | 280,000 | 350,000 | 854,000 | | Plus desired ending inventory | 84,000 | 105,000 | 60,000 | 60,000 | | Inventory needed | 308,000 | 385,000 | 410,000 | 914,000 | | Less beginning inventory | - | 84,000 | 105,000 | - | | Required purchases (on account) | 308,000 | 301,000 | 305,000 | 914,000 | | | | | | | | | | | | | | | | | | | | Schedule of Cash Payments Budget for Inventory Purchases | | | | | | October | November | December | Total-Qtr | | Payment of current month's A/P | 61,600 | 60,200 | 61,000 | 182,800 | | Payment for prior month's A/P | - | 246,400 | 240,800 | 487,200 | | Total budgeted payments | 61,600 | 306,600 | 301,800 | 670,000 | | | | | | | | | | | | | | Selling and Administrative Expense Budget | | | | | | | October | November | December | Total-Qtr | | Salary expense | 21,500 | 21,500 | 21,500 | 64,500 | | Sales commissions expense | 8,400 | 10,500 | 13,125 | 32,025 | | Supplies expense | 2,800 | 3,500 | 4,375 | 10,675 | | Utilities Expense | 2300.00 | 2300.00 | 2300.00 | 6,900 | | Depreciation expense on store fixtures | 8375 | 8375 | 8375 | 25,125 | | Rent expense | 8,000.00 | 8,000.00 | 8,000.00 | 24,000 | | Miscellaneous expense | 1,250.00 | 1,250.00 | 1,250.00 | 163,225 | | Total S&A expenses | 52,625 | 55,425 | 58,925 | 166,975 | | | | | | | | | | | | | | Schedule of Cash Payments for S&A Expenses (Some balances may be zero.) | | | | | October | November | December | Total-Qtr | | Salaries | 21,500 | 21,500 | 21,500 | 64,500 | | Sales commissions | - | 8,400 | 10,500 | 18,900 | | Supplies expense | 2,800 | 3,500 | 4,375 | 10,675 | | Utilities | - | 2,300 | 2,300 | 4,600 | | Depreciation on store fixtures | - | - | - | - | | Rent | 8,000 | 8,000 | 8,000 | 24,000 | | Miscellaneous | 1,250 | 1,250 | 1,250 | 3,750 | | Total payments for S&A expenses | 33,550 | 44,950 | 47,925 | 126,425 | | | | | | | | | | | | | | | | | | | | Cash Budget | October | November | December | Total-Qtr | | Beginning cash balance | - | 10,850 | 10,420 | - | | Issuance of stock | 300,000 | | | | | Collections from customers | 168,000 | 322,000 | 402,500 | 892,500 | | Cash available | 468,000 | 332,850 | 412,920 | | | Less payments | | | | | | For inventory purchases | 61,600 | 60,200 | 61,000 | 182,800 | | For S&A expenses | 33,550 | 44,950 | 47,925 | 126,425 | | Purchase of store fixtures | 450,000 | | | 450,000 | | Pay dividend | | | 40,000 | 40,000 | | Interest expense | | 880 | 1,180 | 2,060 | | Total budgeted payments | 545,150 | 105,150 | 148,925 | 1,288,485 | | Cash balance before borrow/repay | (77,150) | 226,850 | 393,275 | | | Financing activity | | | | | | Borrowing (repayment) | 88,000 | (87,150) | | | | Ending cash balance | 10,000 | 139,700 | 393,275 | 10,015 | | | | | | | | | | | | | | | | | | | | | | | | Pro Forma Income Statement | | | | | | For the Quarter Ended December 31, Year1 | | | | | | | | | | | | Sales revenue | 1,067,500 | | | | | Cost of goods sold | (854,000) | | | | | Gross margin | 213,500 | | | | | S&A expenses | (166,975) | | | | | Operating income | 46,525 | | | | | Interest expense | (2,060) | | | | | Net income | 44,465.00 | | | | | | | |
