Question
Gardner Corporation prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of the master budget for
Gardner Corporation prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of the master budget for the first quarter of 2019:
a. As of December 31, 2018 (the end of the prior quarter), the company's general ledger showed the following account balances:
Debits Credits
Cash $15,000 Accounts Receivable 40,000
Inventory 35,000
Plant and Equip (net) 110,000
Accounts Payable $25,000
Short-term Notes Payable 30,000
Capital Stock 114,000
Retained earnings _______ 31,000
$200,000 $200,000
b. Actual sales for December and budgeted sales for the next four months are as follows:
December, 2018 $140,000
January , 2019 190,000
February, 2019 230,000
March, 2019 120,000
April, 2019 100,000
c. Sales are 35 percent for cash and the rest on account. All sales on account are collected the month following sale. The accounts receivable at December 31 are a result of December credit sales.
d. The company's gross profit rate is 45 percent of sales.
e. Monthly expenses are budgeted as follows: salaries and wages, $16,000 per month; property taxes, $8,000 per month; rent, $15,000 per month; utilities, 3 percent of sales; depreciation, $12,000 per month; other expense, 5 percent of sales
f. At the end of each month, inventory is to be on hand equal to 40 percent of the following month's sales needs, stated at cost.
g. Fifty-five percent of a month's inventory purchases is paid for in the month of purchase; the rest is paid for in the following month.
h. The company will purchase a new computer for $12,000 cash in January, a new copier for $20,000 cash in February, and other equipment for $8,000 cash in March.
i. The company will declare and pay $10,000 in cash dividends per month.
j. The company must maintain a minimum cash balance of $15,000. An open line of credit is available at a local bank for any borrowing that may be needed during the quarter. All borrowing is done at the beginning of a month, and all repayments are made at the end. Borrowings and repayments of principal must be in multiples of $1,000. Interest is paid at the end of each month. The interest rate is 12 percent per annum. (Figure interest on whole months, e.g., 1/12, 2/12.)
1. Create a worksheet for inputs that includes all potential variables that can be changed. Label the worksheet tab as "inputs."
2. Create a worksheet for each of the different budgets. Label the tabs appropriately. The following budgets should be included:
a. Sales Budget
b. Inventory Purchases Budget
c. Selling and Administrative Budget
d. Cash Collections from Customers Schedule
e. Cash Paid for Inventory Purchases Schedule
f. Cash Budget
g. Budgeted Income Statement
h. Budgeted Balance Sheet
3. Each budget should:
a. be on a separate worksheet
b. have a heading centered over the rest of the budget that includes the following:
i. Name of Company
ii. Name of Budget
iii. Date: March 31, 2019 or For the Quarter ended March 31, 2019
c. be prepared on the monthly basis with a total column for the quarter. The budgeted income statement and budgeted balance sheet should be on the quarter basis (not monthly).
4. All worksheets should be interactive (i.e. all worksheet pages except the Input worksheet, should be formula driven).
Hints for Creating Interactive Cash Budget
1. To calculate borrowings to the nearest thousands, you may use the ROUNDUP function.
2. To calculate repayments, you may use the ROUNDDOWN function.
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