Munoz Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, year 1. The company president formed a planning committee to prepare a master budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks. Required a. October sales are estimated to be $340,000, of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 20 percent per month. Prepare a sales budget. b. The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. Prepare a schedule of cash receipts. c. The cost of goods sold is 70 percent of sales. The company desires to maintain a minimum ending inventory equal to 20 percent of the next month's cost of goods sold. However, ending inventory of December is expected to be $12,900. Assume that all purchases are made on account. Prepare an inventory purchases budget. d. The company pays 70 percent of accounts payable in the month of purchase and the remaining 30 percent in the following month. Prepare a cash payments budget for inventory purchases. e. Budgeted selling and administrative expenses per month follow. Salary expense (fixed) $18,900 Sales commissions 4% of Sales Supplies expense 2% of Sales Utilities (fixed) $ 2,300 Depreciation on store fixtures (fixed)* $ 4,900 Rent (fixed) $ 5,700 Miscellaneous (fixed) $ 2,100 *The capital expenditures budget indicates that Munoz will spend $146,600 on October 1 for store fixtures, which are expected to have a $29,000 salvage value and a two-year (24-month) useful life. Use this information to prepare a selling and administrative expenses budget. f. Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for selling and administrative expenses. g. Munoz borrows funds, in increments of $1,000, and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. It pays interest of 2 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $21,000 cash cushion. Prepare a cash budget. h. Prepare a pro forma income statement for the quarter. i. Prepare a pro forma balance sheet at the end of the quarter. j. Prepare a pro forma statement of cash flows for the quarter. Sales Budget Cash sales Sales on account Total budgeted sales October November December $ 136,000 $ 163,200 $ 195,840 204,000 $ EA 244,800 293,760 340,000 $ 408,000 $ 489,600 Required A Required B Required C Required D Required E Required F Required G Required H Required I Required J The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. Prepare a schedule of cash receipts. October November Schedule of Cash Receipts Current cash sales $ 136,000 $ 163,200 Plus collections from A/R 0 204,000 Total collections $ 136,000 $ 367,200 December S $ 195,840 244,800 $ 440,640 Required A Required B Required C Required D Required E Required F Required G Required H Required I Required J The cost of goods sold is 70 percent of sales. The company desires to maintain a minimum ending inventory equal to 20 percent of the next month's cost of goods sold. However, ending inventory of December is expected to be $12,900. Assume that all purchases are made on account. Prepare an inventory purchases budget. October November December Inventory Purchases Budget Budgeted cost of goods sold Plus: Desired ending inventory Inventory needed Less: Beginning inventory Required purchases (on account) $ 238,000 57,120 $ 285,600 $ 342,720 68.544 12,900 295,120 354,144 355,620 0 57,120 68,544 $ 295,120 $ 297,024 S 287,076 Required A Required B Required C Required D Required E Required F Required G Required H Required I Required J The company pays 70 percent of accounts payable in the month of purchase and the remaining 30 percent in the following month. Prepare a cash payments budget for inventory purchases. (Round your final answers to the nearest whole dollar amounts.) October Schedule of Cash Payments Budget for Inventory Purchases November December Payment of current month's accounts payable $ 206,584 $ 207,917 $ Payment for prior month's accounts payable 0 Total budgeted payments for inventory $ 206.584 $ 88,536 296,453 200,953 89,107 $ 290,060 Required A Required B Required C Required D Required E Required F Required G Required H Required I Required J Prepare a selling and administrative expenses budget. October November December Selling and Administrative Expense Budget Salary expense $ 18,900 $ 18,900 $ 18,900 Sales commissions 13,600 16,320 19,584 Supplies expense 6,800 8,160 9,792 Utilities 2,300 2,300 2,300 Depreciation on store fixtures 4,900 4,900 4,900 Rent 5,700 5,700 5,700 Miscellaneous 2,100 2,100 2,100 Total S&A expenses $ 54,300 $ 58,380 $ 63,276 Required A Required B Required C Required D Required E Required F Required G Required H Required I Required J Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for selling and administrative expenses. October November December Schedule of Cash Payments for S&A Expenses Salary expense Sales commissions Supplies expense Utilities Depreciation on store fixtures Rent $ 18,900 S $ 18.900 $ 18.900 0 13,600 16,320 6,800 8,160 9,792 0 2,300 2,300 0 0 0 5,700 5,700 5,700 Miscellaneous 2,100 2,100 2,100 Total payments for S&A expenses $ 33,500 $ 50,760 $ 55,112 Required A Required B Required C Required D Required E Required F Required G Required H Required I Required J Munoz borrows funds, in increments of $1,000, and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. It pays interest of 2 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $21,000 cash cushion. Prepare a cash budget. (Any repayments should be indicated with a minus sign.) Section 1: Cash Receipts Beginning cash balance Add: Cash receipts Total cash available Section 2: Cash Payments For inventory purchases For selling and administrative expenses Purchase of store fixtures Beginning cash balance Total budgeted disbursements Section 3: Financing Activities Surplus (shortage) Borrowing (repayment) Ending cash balance Cash Budget October November December $ 0$ (250,684) $ (186,737) 136,000 367,200 440,640 136,000 116,516 253,903 206,584 296,453 290,060 33,500 146,600 0 0 0 0 6,800 0 8,160 0 386,684 303,253 298,220 (250,684) (186,737) 0 0 $ (250,684) $ (186,737) (44,317) (103,183) $ (147,500) Show less Required A Required B Required C Required D Required E Required F Prepare a pro forma income statement for the quarter. Required F Required G Required H Required I Required J MUNOZ COMPANY Pro Forma Income Statement For the Quarter Ended December 31, Year 1 0 0 $ 0 Required A Required B Required C Required D Required E Required F Required G Required H Required I Required J Prepare a pro forma balance sheet at the end of the quarter. (Amounts to be deducted should be indicated by a minus sign.) MUNOZ COMPANY Pro Forma Balance Sheet Assets Total assets Liabilities Equity December 31, Year 1 0 $ 0 Total liabilities and equity $ 0 Required A Required B Required C Required D Required E Required F Required G Required H Required I Required J Prepare a pro forma statement of cash flows for the quarter. (Cash outflows should be indicated with a minus sign.) MUNOZ COMPANY Pro Forma Statement of Cash Flows For the Quarter Ended December 31, Year 1 Cash flows from operating activities Net cash flows from operating activities Cash flows from investing activities Cash flow from financing activities $ 0 SA $ 0