Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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

  1. October sales are estimated to be $400,000, of which 45 percent will be cash and 55 percent will be credit. The company expects sales to increase at the rate of 20 percent per month. Prepare a sales budget.

  2. 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.

  3. 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 months cost of goods sold. However, ending inventory of December is expected to be $13,900. Assume that all purchases are made on account. Prepare an inventory purchases budget.

  4. The company pays 80 percent of accounts payable in the month of purchase and the remaining 20 percent in the following month. Prepare a cash payments budget for inventory purchases.

  5. Budgeted selling and administrative expenses per month follow

.image text in transcribed

*The capital expenditures budget indicates that Munoz will spend $180,600 on October 1 for store fixtures, which are expected to have a $39,000 salvage value and a two-year (24-month) useful life. Use this information to prepare a selling and administrative expenses budget.

  1. 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.

  2. 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 $31,000 cash cushion. Prepare a cash budget.

  3. Prepare a pro forma income statement for the quarter.

  4. Prepare a pro forma balance sheet at the end of the quarter.

  5. Prepare a pro forma statement of cash flows for the quarter

image text in transcribedimage text in transcribed

Salary expense (fixed) Sales commissions Supplies expense Utilities (fixed) Depreciation on store fixtures (fixed)* Rent (fixed) Miscellaneous (fixed) $19,900 4% of Sales 2% of Sales $ 3,300 $ 5,900 $ 6,700 $ 3,100 Required A Required B Required C Required D Required E Required F Required G LLLLLLLLS Required H Required I Required ] Prepare a pro forma income statement for the quarter. 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 ] 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 $31,000 cash cushion. Prepare a cash budget. (Any repayments should be indicated with a minus sign.) Show less A Cash Budget October November December Section 1: Cash Receipts 0 0 0 Total cash available Section 2: Cash Payments 0 0 0 Total budgeted disbursements Section 3: Financing Activities 0 0 0 $ 0 $ 0 $ 0

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

Step: 3

blur-text-image

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

New Challenges For Future Sustainability And Wellbeing

Authors: Ercan Özen, Simon Grima, Rebecca Dalli Gonzi

1st Edition

1800439695, 9781800439696

More Books

Students also viewed these Accounting questions

Question

Is this really true, or am I just taking it for granted?

Answered: 1 week ago