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	$26,000
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.

• Part A
• Part B
• Part C
• Part D
• Part E
• Part F

(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
Receipts
Disbursements
Excess receipts over disb.
Balance before borrowings
Borrowings
Loan repayments
Cash balance, ending

Feedback

Partially correct

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	$26,000
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.

• Part A
• Part B
• Part C
• Part D
• Part E
• Part F

(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
Receipts
Disbursements
Excess receipts over disb.
Balance before borrowings
Borrowings
Loan repayments
Cash balance, ending

Feedback

Partially correct

(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		Merchandise payable
Accounts receivable		Dividend payable
Inventory		Rent payable
Prepaid insurance		Loans payable
Fixtures		Interest payable
Total assets		Stockholders' equity
		Total liab. & equity