Developing a Master Budget for a Merchandising Organization

Information:

Assets Liabilities and Stockholders' Equity

Cash: $2,525 Merchandise purchases payable: $2,400

Accounts receivable: $2,040 Dividends payable: $710

Inventory: $3,400 Stockholders' Equity: $8,005

Prepaid Insurance $150

Fixtures: $3,000

Total Assets: $11,115 Total liabilities and equity: $11,115

Actual and forecasted sales for selected months in the upcoming year are as follows:

Month Sales Revenue (in thousands)

January $2,600

February $2,700

March $3,000

April $3,600

May $3,800

June $3,500

July $3,200

August $4,000

Monthly operating expenses are as follows:

Wages and salaries: $750

Depreciation: $75

Advertising: $55

Other costs: $350

Cash dividends for the store of $710 thousand are declared during the third month of each quarter and are paid during the first month of the following quarter. Operating expenses, except insurance, rent, and depreciation are paid as incurred. The prepaid insurance is for five more months. Cost of goods sold is equal to 60% of sales. Ending inventories are sufficient for 150% of the next month's cost of sales. Purchases during any given month are paid in full during the following month. Cash sales account for 50% of the revenue. Of the credit sales, 60% are collected in the next month and 40% are collected in the month after. Money can be borrowed and repaid in multiples of $100 thousand at an interest rate of 12% per year. The company desires a minimum cash balance of $2 million on the first of each month. At the time the principal is repaid, interest is paid on the portion of principal that is repaid. All borrowing is at the beginning of the month, and all repayment is at the end of the month. Money is never repaid at the end of the month it is borrowed.

a) purchases budget for each month of the second quarter ending June 30.

b) cash receipts schedule for each month of the second quarter ending June 30. Do not include borrowings.

c) cash disbursements schedule for each month of the second quarter ending June 30. Do not include repayments of borrowings.

d) cash budget for each month of the second quarter ending June 30. Include budgeted borrowings and repayments

e) income statement for each month of the second quarter ending June 30.

f) budgeted balance sheet as of June 30.