Master Budget: XYZ Merchandising Company

XYZ Merchandising Company is preparing its master budget for year 2012, please consider the balance sheet below prepared for the year 2011.

XYZ Merchandising Balance Sheet December 31, 2011
Cash	25,000
Account Receivable	52,600
Inventory	30,500
Long-Term Assets	50,000
Accounts payable		27,420
Stock		75,000
Retained Earning		55,680

a. Sales for the first quarter of 2012 are expected to be $120,000 and sales are expected to increase each quarter by 10% through quarter four of 2012. Sales for the first quarter of 2013 areexpected to be $150,000. All sales are initially on credit.

b. Credit sales are collected over two quarters. In the quarter of sale 70% of the credit sales are collected and the additional 30% is collected in the quarter following the sale.

c. Cost of good soldequals 50% of sales. Inventory purchases at ABC are made based on a desired ending inventory of 25% of the next quarter's cost of good sold, beginning inventory is $30,500.

d. All inventory purchases are made on credit and the payment cycle is over two quarters with 60% of the purchases being paid in the quarter of purchase and the remainder paid in the following quarter. Inventory units cost $5.00 each.

e. Selling and Administrative expenses include a variable and fixed portion. The variable portion is 30% of Sales and the fixed portion will be $17,000 for the first quarter, $18,000 for the second quarter, $20,000 for the third quarter, and $22,000 for the fourth quarter. All cash payment are made in the same quarter as the expense. The fixed portion of S&A Expense includes $3,000 of depreciation in the first quarter, 4,000 in the second quarter, 6,000 in the third quarter, and 8,000 in the fourth quarter.

f. The company plans on paying $2,000 in cash dividends each quarter and will make cash investment in equipment in the second quarter for $8,000, the third quarter for $12,000, and the fourth quarters for $17,000.

Required:

Please complete the sales budget, cash receipts from sales, inventory purchases budget, cash payments ofr inventory, selling and administrative budget, cash payment for selling and administrative costs. Please clearly identify any amounts that are relevant for the cash budget or the pro-forma financial statements. For bonus points, complete a Cash Budget with the information provided in letter f.