Master Budget for a Merchandising Organization Assume Nordstrom prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for one of its stores in thousands). NORDSTROM Balance Sheet March 31 Assets Uabilities and Stockholders' Equity Merchandise Cash $2,525 purchases payable $2,400 Accounts recevable 2,040 Dividends payable 710 Inventory 3.400 Stockholders equity 8,005 Prepaid insurance 150 Fixtures 3.000 Totallites and Total assets $11,115 equity 511,115 Actual and forecasted sales for selected months in the upcoming year are as follows: Month (in thousands) Sales Revenue January 52.600 February 2,700 March 3,000 April 3.600 May 3,800 June 3.500 July 1200 Aug 4,000 Monthly operating expenses are as follows: Wages and salanes 5750 Depreciation 75 Advertising 55 Other costs the CON Cash dividends for the store of $710 thousand 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. The prepaid insurance is for five more months. Cost of goods sold is equal to 60% of sales. Ending inventories are sufficient for 150% of the next month's cost of sales. Purchases during any given month are paid in full during the following month. Cash sales account for 50% of the revenue of the credit sales, 60% are collected in the next month and 40% are collected in the month after. Money can be borrowed and repaid in multiples of $100 thousand at an interest rate of 12% per year. The company desires a minimum cash balance of $2 million 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. (b) Prepare a cash receipts schedule for each month of the second quarter ending June 30. Do not include borrowings. NORDSTROMS Schedule of Monthly Cash Receipts (In thousands) Quarter Ending June 30 April May June Total cash receipts S 760 S 1,750 $ 2.510 3 Total OX (c) Prepare a cash disbursements schedule for each month of the second quarter ending June 30, Do not include repayments of borrowings. NORDSTROMS Schedule of Monthly Cash Disbursements (In thousands) Quarter Ending June 30 April May OX OXS Total cash disbursements June OXS Total OX Check (d) Prepare a cash budget for each month of the second quarter ending June 30. 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) Total OX OX OX NORDSTROMS Monthly Cash Budget (In thousands) Quarter Ending June 30 April May June Cash Balance, beginning 0X5 Oxs 0 X5 Receipts 0X OX Disbursements 0.X 0 x OX Excess recepts over ditt OX 0 x OX Balance before borrowings 0 X OX Borrowings OX 0 0 Loan repayments O 0 x 0 x Cash balance, ending 5 ONS 0 x 5 OX5 OX OX Ox OX 0.X Check (e) Prepare an income statement for each month of the second quarter ending June 30. Only use negative signs to show net losses for income. NORDSTROMS Budgeted Monthly Income Statements (In thousands) Quarter Ending June 30 April May June Total Sales OXS 0X5 0X5 OX Cost of sales 0 x 0X OX OX Gross profit 0X 0 x OX Ox Operating expenses Wages and salaries OX OX 0 X OX Depreciation OX OX OX Advertising OX OX DX Other costs OX 0 x Insurance OX 0 X 0 x 0 x Interest OX 0X OX OX Total expenses OX 0.X OX OX Pre-tax income OX OX3 OX OX 0.X OX OX 5 OX Check (1) Prepare a budgeted balance sheet as of June 30. NORDSTROMS Budgeted Balance Sheet (In thousands) June 30 Assets Llabilities and Equity Cash 0 x Merchandise payable s Accounts receivable 0 x Dividend payable Inventory OX Prepaid insurance Ox Fixtures 0 x Total assets 5 0X Stockholders' equity Total liab. & equity OX OX 0 x OX Check
