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Master Budget Case Project CHECK FIGURES ( 2 a ) February purchases: $ 6 6 , 5 0 0 ( 2 b ) February cash
Master Budget Case Project CHECK FIGURES a February purchases: $ b February cash disbursements for purchases: $ Franchesca Company, a merchandising company, 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. a As of December the end of the prior quarter the companys balance sheet showed the following account balances: Cash $ Accounts receivable $ Inventory $ Buildings and equipment net $ Accounts payable $ Common stock $ Retained earnings $ $ $ b Actual and budgeted sales are as follows: December actual $ January $ February $ March $ April $ c Sales are for cash and on credit. All payments on credit sales are collected in the month following the sale. The accounts receivable at December are a result of December credit sales. d The companys gross margin percentage is of sales. In other words, cost of goods sold is of sales. e Each months ending inventory should equal of the following month's budgeted cost of goods sold. f Onequarter of a months inventory purchases is paid for in the month of purchase; the other threequarters is paid for in the following month. The accounts payable at December are the result of December purchases of inventory. g Monthly expenses are as follows: commissions, of sales; rent, $; other expenses excluding depreciation of sales. Assume that these expenses are paid monthly. Depreciation is $ for the quarter and includes depreciation on new assets acquired during the quarter. h Equipment will be acquired for cash: $ in January and $ in February. i Management would like to maintain a minimum cash balance of $ at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $ at the beginning of each month, up to a total loan balance of $ The interest rate on these loans is per month, and for simplicity, we will assume that interest is not compounded. Accumulated interest on any amounts borrowed must be paid at the end of the quarter. Also, to the extent it is able ie while maintaining the minimum cash requirement the company must repay any outstanding loans at the end of the quarter. Required: Using the data above, complete the following statements and schedules for the first quarter: Schedule of expected cash collections: January February March Total Cash sales $ Credit sales $ Total collections $ a Merchandise purchases budget: January February March Total Budgeted cost of goods $ $ Add desired ending inventory $ Total needs $ Less beginning inventory $ Required purchases $ $ sales times $ $times times $ b Schedule of expected cash disbursements for merchandise purchases: January February March Total December purchases $ $ January purchases $ $ $ February purchases $ March purchases $ Total cash disbursements for purchases $ Beginning balance of the accounts payable. Schedule of expected cash disbursements for selling and administrative expenses: January February March Total Commissions $ Rent $ Other expenses $ Total cash disbursements for selling and administrative expenses $ Cash budget: January February March Total Cash balance, beginning $ Add cash collections $ Total cash available $ Less cash disbursements: For inventory $ For operating expenses $ For equipment $ Total cash disbursements $ Excess deficiency of cash $ Financing Etc. Prepare an absorption costing income statement for the quarter ending March as shown in Schedule in the chapter. Prepare a balance sheet as of March
Master Budget Case Project
CHECK FIGURES
a February purchases: $
b February cash disbursements for purchases: $
Franchesca Company, a merchandising company, 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.
a As of December the end of the prior quarter the companys balance sheet showed the following account balances:
Cash $
Accounts receivable $
Inventory $
Buildings and equipment net $
Accounts payable $
Common stock $
Retained earnings $
$ $
b Actual and budgeted sales are as follows:
December actual $
January $
February $
March $
April $
c Sales are for cash and on credit. All payments on credit sales are collected in the month following the sale. The accounts receivable at December are a result of December credit sales.
d The companys gross margin percentage is of sales. In other words, cost of goods sold is of sales.
e Each months ending inventory should equal of the following month's budgeted cost of goods sold.
f Onequarter of a months inventory purchases is paid for in the month of purchase; the other threequarters is paid for in the following month. The accounts payable at December are the result of December purchases of inventory.
g Monthly expenses are as follows: commissions, of sales; rent, $; other expenses excluding depreciation of sales. Assume that these expenses are paid monthly. Depreciation is $ for the quarter and includes depreciation on new assets acquired during the quarter.
h Equipment will be acquired for cash: $ in January and $ in February.
i Management would like to maintain a minimum cash balance of $ at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $ at the beginning of each month, up to a total loan balance of $ The interest rate on these loans is per month, and for simplicity, we will assume that interest is not compounded. Accumulated interest on any amounts borrowed must be paid at the end of the quarter. Also, to the extent it is able ie while maintaining the minimum cash requirement the company must repay any outstanding loans at the end of the quarter.
Required:
Using the data above, complete the following statements and schedules for the first quarter:
Schedule of expected cash collections:
January February March Total
Cash sales $
Credit sales $
Total collections $
a Merchandise purchases budget:
January February March Total
Budgeted cost of goods $ $
Add desired ending inventory $
Total needs $
Less beginning inventory $
Required purchases $
$ sales times $
$times times $
b Schedule of expected cash disbursements for merchandise purchases:
January February March Total
December purchases $ $
January purchases $ $ $
February purchases $
March purchases $
Total cash disbursements for purchases $
Beginning balance of the accounts payable.
Schedule of expected cash disbursements for selling and administrative expenses:
January February March Total
Commissions $
Rent $
Other expenses $
Total cash disbursements for selling and administrative expenses $
Cash budget:
January February March Total
Cash balance, beginning $
Add cash collections $
Total cash available $
Less cash disbursements:
For inventory $
For operating expenses $
For equipment $
Total cash disbursements $
Excess deficiency of cash $
Financing
Etc.
Prepare an absorption costing income statement for the quarter ending March as shown in Schedule in the chapter.
Prepare a balance sheet as of March
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