Developing a Master Budget for a Merchandising Organization Peyton Department Store prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for 2010.

PEYTON DEPARTMENT STORE Balance Sheet March 31, 2010
Assets		Liabilities and Stockholders' Equity
Cash	$2,000	Accounts payable	$26,000
Accounts receivable	25,000	Dividends payable	17,000
Inventory	30,000	Rent payable	1,000
Prepaid Insurance	2,000	Stockholders' equity	40,000
Fixtures	25,000
Total assets	$84,000	Total liabilities and equity	$84,000

Actual and forecasted sales for selected months in 2010 are as follows:

Month	Sales Revenue
January	$80,000
February	50,000
March	40,000
April	50,000
May	60,000
June	70,000
July	90,000
August	80,000

Monthly operating expenses are as follows:

Wages and salaries	$27,000
Depreciation	100
Utilities	1,000
Rent	1,000

Cash dividends of $17,000 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. Rent is paid during the following month. The prepaid insurance is for five more months. Cost of goods sold is equal to 50 percent of sales. Ending inventories are sufficient for 120 percent of the next month's sales. Purchases during any given month are paid in full during the following month. All sales are on account, with 50 percent collected during the month of sale, 40 percent during the next month, and 10 percent during the month thereafter. Money can be borrowed and repaid in multiples of $1,000 at an interest rate of 12 percent per year. The company desires a minimum cash balance of $2,000 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.

June $ (d) Prepare a cash budget for each month of the second quarter ending June 30, 2010. Include budgeted borrowings and repayments. Only use negative signs, if needed, for: excess receipts over disbursements, balance before borrowings and cash balances (beginning and ending). Peyton Department Store Monthly Cash Budget Quarter Ending June 30, 2010 April May Total Cash balance, beginning 2,000 $ 2,000 $ 2,000 $ 2,000 Receipts 46,000 54,000 64,000 164,000 Disbursements 72,000 60,000 65,000 197,000 Excess receipts over disb. 0 X 0 X 1,000 X OX Balance before borrowings (24,000) (4,000) 1,000 (31,000) Borrowings 26,000 6,000 1,000 33,000 Loan repayments 0 O Cash balance, ending 2,000 $ 2,000 $ 2,000 $ 2,000 0 O $ (e) Prepare an income statement for each month of the second quarter ending June 30, 2010. Only use negative signs to show net losses in income. Peyton Department Store Budgeted Monthly Income Statements Quarter Ending June 30, 2010 April May June $ 50,000 60,000 $ 70,000 25,000 30,000 35,000 25,000 30,000 35,000 Total 180,000 90,000 90,000 27,000 27,000 27,000 100 81,000 300 100 100 Sales Cost of sales Gross profit Operating expenses: Wages and salaries Depreciation Utilities Rent Insurance Interest Total expenses Net income 1,000 1,000 1,000 1,000 1,000 1,000 400 3,000 3,000 1,200 400 400 270 X 340 X 360 X 970 X 0 X OX OX 0 x 0 x $ $ 0 X $ 0 X $ OX (f) Prepare a budgeted balance sheet as of June 30, 2010. Assets Cash $ Accounts receivable Inventory Prepaid insurance Fixtures Peyton Department Store Budgeted Balance Sheet June 30, 2010 Liabilities and Equity 2,000 Merchandise payable $ 47,000 41,000 Dividend payable 17,000 54,000 Rent payable 1,000 800 Loans payable 30,000 X 24,700 Interest payable 850 X 122,500 Stockholders' equity 40,000 X Total liab. & equity $ 122,500 Total assets $