master budget problem
Near the end of 2017, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2017 DIMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2017 Assets S 37,000 520,000 157, 500 Cash Accounts receivable Inventory Total current assets Equipment Less: accumulated depreciation $714, 500 648,000 81,000 567,000 $1,281, 500 Equipment, net Total assets Liabilities and Equity S360,000 15,000 91,000 Accounts payable Bank loan payable Taxes payable (due 3/15/2018) Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and equity S466,000 472, 500 343,000 815, 500 $1,281, 500 To prepare a master budget for January, February, and March of 2018, management gathers the following information a. The company's single product is purchased for $30 per unit and resold for $53 per unit. The expected inventory level of 5,250 units on December 31, 2017, is more than management's desired level, which is 20% of the next month's expected sales (in units) Expected sales are: January, 6,500 units, February, 9,000 units, March, 11,000 units, and April, 10,500 units b. Cash sales and credit sales represent 20% and 80%, respectively, of total sales. Of the credit sales, 63% is collected in the first month after the month of sale and 37% in the second month after the month of sale. For the December 31, 2017, accounts receivable balance, $125,000 is collected in January and the remaining $395,000 is collected in February. C. Merchandise purchases are paid for as follows: 20% in the first month after the month of purchase and 80% in the second month after the month of purchase. For the December 31, 2017, accounts payable balance, $75,000 is paid in January and the remaining $285,000 is paid in February. d. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $66,000 per year e. General and administrative salaries are $132,000 per year. Maintenance expense equals $1,900 per month and is paid in cash f. Equipment reported in the December 31, 2017, balance sheet was purchased in January 2017. It is being depreciated over eight years under the straight-line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter: January, $38,400; February, $103,200; and March, $21,600. This equipment will be depreciated under the straight- line method over eight years with no salvage value. A full month's depreciation is taken for the month in which equipment is purchased. g. The company plans to buy land at the end of March at a cost of $165,000, which will be paid with cash on the last day of the month h. The company has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and interest is paid at each month-end based on the beginning balance. Partial or full payments on these loans can be made on the last day of the month. The company has agreed to maintain a minimum ending cash balance of $15,050 at the end of each month. i. The income tax rate for the company is 37%. Income taxes on the first quarter's income will not be paid until April 15. Required Prepare a master budget for each of the first three months of 2018 include the following component budgets: 1. Monthly sales budgets. 2. Monthly merchandise purchases budgets. 3. Monthly selling expense budgets. 4. Monthly general and administrative expense budgets. 5. Monthly capital expenditures budgets. 6. Monthly cash budgets. 7. Budgeted income statement for the entire first quarter (not for each month). 8. Budgeted balance sheet as of March 31, 2018. Required 6 Required 6 Required 1 Required 2 Required 3 Required 4 Required 5 Calc Cash BudRequired 7 Required 8 Monthly general and administrative expense budgets. January February March Equipment - beginning of month Equipment purchases Equipment - end of month Monthly depreciation expense S 648,000 686,400 $ 789,600 21,600 $ 686,400$ 789,600$811,200 38,400 DIMSDALE SPORTS CO General and Administrative Expense Budget January, February, and March 2018 January February March Salaries expense Maintenance expense Required 3 Required 5 Required 6 Required 6 Required 1 Required 2 Required 3 Required 4 Required 5 Calc Cash Bud Reqired 7 Required 8 Monthly capital expenditures budgets. DIMSDALE SPORTS COMPANY Capital Expenditures Budget January, February, and March 2018 January February March Equipment purchases Land purchase Total Required 4 Required 6 Calc Required 6 Required 6 Cash Bud Required 1 Required 2 Required 3 Required 4 Required 5 Required 7 Required 8 Calc Calculate the budgeted cash receipts and cash payments. (Negative values should be indicated with minus sign. Round your final answers to the nearest whole dollar.) Calculation of Cash receipts from customers January February March Sales in units Selling price per unit Total budgeted sales Cash sales Sales on credit 20% 80% March 31 TotalJanuary February March Receivable Accounts Receivable January 1 $520,000 125,000 395,000 Credit sales from January February March Total collection of receivables $125,000 $ 395,000S Total cash receipts from customers January February March Collections of receivables Calculation of payments for merchandise January February March Desired ending inventory (units) Budgeted sales in units Total units required Beginning inventory (units) Number of units to be purchased Cost per unit Total cost of purchases aid in March 31 Payable TotalJanuary $ 360,000S February March Accounts Payable - January 1 75,000 $285,000 Merchandise purchases in January February March Total cash paid for merchandise 75,000 $285,000$ Required 5 Required 6 Cash Bud>
