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Problem 9-20 Completing a Master Budget (LO2) The following data relate to the second quarter operations of Leisure Sports, a wholesale distributor of consumer sporting goods, as of March 31: Cash Accounts receivable Inventory Building and equipment, net Accounts payable Common shares Y Retained earnings $ 9,000 48,000 12,600 214,100 18,300 190,000 75,400 5 a. Actual sales for March and budgeted sales for April through July are as follows: March (actual) April May June July $60,000 70,000 85,000 90.000 50,000 b. Sales are 20% cash and 80% credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales. c. The company's gross margin is 40% of sales. d. Monthly expenses are as follows: salaries and wages $7,500 per month; shipping, 6% of sales: advertising, $6,000 per month other expenses, 4% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $6,000 in total for 1 1 points b. Sales are 20% cash and 80% credit. Credit soles are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales. C. The company's gross margin is 40% of sales d. Monthly expenses are as follows: salaries and wages $7,500 per month: shipping, 6% of sales, advertising, $6,000 per month other expenses, 4% of sales. Depreciation, including depreciation on new assets acquired during the quarter will be $6,000 in total for the quarter. e. Each month's ending inventory should equal 30% of the following month's cost of goods sold. f. One-half of a month's inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. g. Equipment costing $11,500 will be purchased for cash in April and $3,000 will be purchased for cash in May. h. Dividends of $3,500 will be declared and paid in June. i. The company must maintain a minimum cash balance of $8,000. An open line of credit is available at a local bank. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month. The monthly interest rate is 1%. Interest must be paid at the end of each month based on the total loans outstanding for that month. Required: Using the data above, complete the following: 1-a. Sales budget: Book References $ Total sales Cash Credit Sales Budget March April May June July 60.000 $ 70,000 $85.000 $ 90.000 $ 50.000 12 000 14.000 17,000 18.000 10,000 48.000 $ 58,000 $ 68,000 $ 72,000 $ 40,000 5 Saved 27 0 Cash sales Credit sales Total collections Schedule of Expected Cash Collections April May June $ 14,000 $ 17,000 $ 18,000 $ 48,000 56,000 68,000 $ 62,000 $ 73,000 $ 86,000 $ Quarter 49,000 172,000 221,000 es 2-a. Merchandise purchases budget: April May June Quarter Budgeted cost of goods sold $ 42,000 $ 51,000 $ 54,000 $ 147,000 Add desired ending intentoryt 15,300 16,200 9,000 9,000 Total needs $ 57,300 $ 67,200 $ 63,000 $ 156,000 Less beginning inventory 12,600 15,300 16,200 12,600 Required purchases $ 44,700 $ 51,900 $ 46,800 $ 143,400 "For April sales: $70,000 sales x 60% cost ratio tAt April 30: $51,000 * 30% At June 30: July sales $50,000 X 60% cost ratio * 30% March purchases April purchases May purchases June purchases Total disbursements April May June Quarter $ 18,300 $ 0 $ of $ 18,300 22,350 22,350 0 44,700 0 25,950 $ 25,950 51,900 0 0 23,400 23,400 $ 40,650 $ 48,300 $ 49,350 $ 138,300 SK nces 3. Schedule of expected cash disbursements-Selling and administrative expenses: Salaries and wages + Shipping Advertising Other Total disbursements April May June Quarter $ 7,500 $ 7,500 $ 7,500 $ 22,500 4,200 5,100 5,400 14,700 6,000 6,000 6,000 18,000 2,800 3,400 3,600 9,800 $ 20,500 $ 22,000 $ 22,500 $ 65,000 4. Cash budget: (Round your intermediate calculations and final answers to the nearest whole dollar. Also, round up your interest calculations to the next whole dollar amount. Cash deficiency, repayments and interest should be indicated by a minus sign.) $ April 9,000 $ 62,000 71,000 May 8,350 $ 73,000 81,350 June Quarter 8,050 $ 9,000 85,000 221,000 94,050 230,000 ok onces 40,650 20,500 11,500 48,300 22,000 3,000 49,350 22,500 0 Cash Budget Cash balance, beginning Add cash collections Total cash available Less cash disbursements: For inventory purchases For selling and administrative expenses For equipment purchases For dividend payments Total cash disbursements Excess (deficiency) oftash Financing Borrowings Repayments Interest Total financing Cash balance, ending 138,300 65,000 14,500 3,500 221,300 8.700 0 0 72,650 (1,650) 73,300 8,050 3.500 75,350 18,700 0 0 10.000 0 0 (10,000) (300) 0 0 10,000 (10,000) (300) (300) 8,400 0 10,000 8,350 $ (10,300) 8,400 5 $ 8,050 $ C Taw Prey 1 of 2 !!! Next > 5. Prepare an absorption costing income statement for the quarter ended June 30. LEISURE SPORTS Income Statement For the Quarter Ended June 30 Sales $ 245,000 Cost of goods sold: Beginning inventory Add purchases Goods available for sale ook 12,600 143,400 156,000 9,000 rences 147,000 98,000 Ending inventory Gross margin Less Operating expenses Salaries and wages Shipping Advertising Other expenses Depreciation 22,500 14,700 18,000 9,800 6,000 Interest expense Operating income Interest expense 71,000 27,000 300 26,700 Net income $ LEISURE SPORTS Balance Sheet 1 June 30 Assets Current assets: Cash 1 points Account receivable 8,400 72,000 9,000 Inventory eBook References Total current assets Buildings and equipment, net 89,400 222,600 312,000 Total assets $ #labilities and Stockholders' Equity Account payable $ 23,400 Stockholders' equity Common stock Retained earnings $ 190.000 98,600 Common stock Total liabilities and stockholders' equity 288,600 312,000 $