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 $3,000 Accounts payable $26,000 Accounts receivable 25,000 Dividends payable 17,000 Inventory 30,000 Rent payable 2,000 Prepaid Insurance 2,000 Stockholders' equity 40,000 Fixtures 25,000 Total assets $85,000 Total liabilities and equity $85,000 Actual and forecasted sales for selected months in 2010 are as follows: Month Sales Revenue January $50,000 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 2,000 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 $3,000 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. (a) Prepare a purchases budget for each month of the second quarter ending June 30, 2010. Peyton Department Store Monthly Purchase Budget Quarter Ending June 30, 2010 April May June Total Budgeted purchases $Answer 31,000 $Answer 36,000 $Answer 47,000 $Answer 114,000 (b) Prepare a cash receipts schedule for each month of the second quarter ending June 30, 2010. Do not include borrowings. Peyton Department Store Schedule of Monthly Cash Receipts Quarter Ending June 30, 2010 April May June Total Total cash receipts $Answer 46,000 $Answer 54,000 $Answer 64,000 $Answer 164,000 (c) Prepare a cash disbursements schedule for each month of the second quarter ending June 30, 2010. Do not include repayments of borrowings. Peyton Department Store Schedule of Monthly Cash Disbursements Quarter Ending June 30, 2010 April May June Total Total cash disbursements $Answer 71,000 $Answer 59,000 $Answer 64,000 $Answer 194,000 (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 June Total Cash balance, beginning $Answer 2,000 $Answer (22,000) $Answer (2,000) $Answer 0 Receipts Answer 1,000 Answer 25,000 Answer 5,000 Answer 0 Disbursements Answer 71,000 Answer 59,000 Answer 64,000 Answer 0 Excess receipts over disb. Answer 0 Answer 0 Answer 0 Answer 0 Balance before borrowings Answer 0 Answer 0 Answer 0 Answer 0 Borrowings Answer 0 Answer 0 Answer 0 Answer 0 Loan repayments Answer 0 Answer 0 Answer 0 Answer 0 Cash balance, ending $Answer (22,000) $Answer (2,000) $Answer 3,000 $Answer 0 (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 Total Sales $Answer 0 $Answer 0 $Answer 0 $Answer 0 Cost of sales Answer 0 Answer 0 Answer 0 Answer 0 Gross profit Answer 0 Answer 0 Answer 0 Answer 0 Operating expenses: Wages and salaries Answer 0 Answer 0 Answer 0 Answer 0 Depreciation Answer 0 Answer 0 Answer 0 Answer 0 Utilities Answer 0 Answer 0 Answer 0 Answer 0 Rent Answer 0 Answer 0 Answer 0 Answer 0 Insurance Answer 0 Answer 0 Answer 0 Answer 0 Interest Answer 0 Answer 0 Answer 0 Answer 0 Total expenses Answer 0 Answer 0 Answer 0 Answer 0 Net income $Answer 0 $Answer 0 $Answer 0 $Answer 0 (f) Prepare a budgeted balance sheet as of June 30, 2010. Peyton Department Store Budgeted Balance Sheet June 30, 2010 Assets Liabilities and Equity Cash $Answer 0 Merchandise payable $Answer 0 Accounts receivable Answer 0 Dividend payable Answer 0 Inventory Answer 0 Rent payable Answer 0 Prepaid insurance Answer 0 Loans payable Answer 0 Fixtures Answer 0 Interest payable Answer 0 Total assets $Answer 0 Stockholders' equity Answer 0 Total liab. & equity $Answer 0