Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Merchandising: Preparation of a complete master budget Isle Corp., a merchandising company, reports the following balance sheet at December 31. To prepare a master budget

image text in transcribed

Merchandising: Preparation of a complete master budget

image text in transcribed

Isle Corp., a merchandising company, reports the following balance sheet at December 31.

To prepare a master budget for January, February, and March, use the following information.

a. The companys single product is purchased for $30 per unit and resold for $45 per unit. The inventory level of 5,000 units on December 31 is more than managements desired level, which is 25% of the next months budgeted sales units. Budgeted sales are January, 6,000 units; February, 8,000 units; March, 10,000 units; and April, 9,000 units. All sales are on credit.

b. Cash receipts from sales are budgeted as follows: January, $382,500; February, $421,500; March, $355,500.

c. Cash payments for merchandise purchases are budgeted as follows: January, $72,000; February, $306,000; March, $123,000.

d. Sales commissions equal to 20% of sales dollars are paid each month. Sales salaries (excluding commissions) are $7,500 per month.

e. General and administrative salaries are $12,000 per month. Maintenance expense equals $3,000 per month and is paid in cash.

f. New equipment purchases are budgeted as follows: January, $72,000; February, $96,000; and March, $28,800. Budgeted depreciation expense is January, $6,375; February, $7,375; and March, $7,675.

g. The company budgets a land purchase at the end of March at a cost of $150,000, which will be paid with cash on March 31.

h. The company has a contract with its bank to obtain additional loans as needed. The interest rate is 1% per month, and interest is paid at each month-end based on the beginning-month balance. Partial or full payments on these loans are made on the last day of the month. The company maintains a minimum ending cash balance of $36,000 at the end of each month.

i. The income tax rate for the company is 40%. Income taxes on the first quarters income will not be paid until April 15.

Required

Prepare a master budget for the months of January, February, and March that has the following budgets (round amounts to the nearest dollar).

1. Sales budgets.

2. Merchandise purchases budgets.

3. Selling expense budgets.

4. General and administrative expense budgets.Hint: Depreciation is included in the general and administrative budget for merchandisers.

5. Capital expenditures budgets.

6. Cash budgets.

7. Budgeted income statement for entire quarter (not monthly) ended March 31.

8. Budgeted balance sheet as of March 31.

ISLE CORPORATION Cash Budget ISLE CORPORATION Balance Sheet December 31 Assets Liabilities and Equity

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Aat Management Accounting Budgeting

Authors: BPP Learning Media

1st Edition

1509718400, 978-1509718405

More Books

Students also viewed these Accounting questions