Near the end of 2019, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2019.
To prepare a master budget for January, February, and March of 2020, management gathers the following information.
a. The companys single product is purchased for $20 per unit and resold for $56 per unit. The expected inventory level of 5,000 units on December 31, 2019, is more than managements desired level, which is 20% of the next months expected sales (in units). Expected sales are January, 6,750 units; February, 9,000 units; March, 11,250 units; and April, 10,000 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, 2019, accounts receivable balance, $120,000 is collected in January 2020 and the remaining $400,000 is collected in February 2020.
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, 2019, accounts payable balance, $60,000 is paid in January 2020 and the remaining $295,000 is paid in February 2020.
d. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $72,000 per year.
e. General and administrative salaries are $132,000 per year. Maintenance expense equals $2,200 per month and is paid in cash.
f. Equipment reported in the December 31, 2019, balance sheet was purchased in January 2019. 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, $31,200; February, $100,800; and March, $21,600. This equipment will be depreciated under the straight-line method over eight years with no salvage value. A full months 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 $150,000, 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 $27,000 at the end of each month.
i. The income tax rate for the company is 37%. Income taxes on the first quarters income will not be paid until April 15.
Required: Prepare a master budget for each of the first three months of 2020; 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, 2020.
$ 655,500 DIMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2019 Assets Cash $ 35,500 Accounts receivable 520,000 Inventory 100,000 Total current assets Equipment 552,000 Less: Accumulated depreciation 69,000 Equipment, net Total assets Liabilities and Equity Accounts payable $ 355,000 Bank loan payable 13,000 Taxes payable (due 3/15/2020) 89,000 Total liabilities Common stock 471,000 Retained earnings 210,500 Total stockholders' equity Total liabilities and equity 483,000 $1,138,500 $ 457,000 681,500 $1,138,500 Complete this question by entering your answers in the tabs below. Required 1 Required 2 || Required 3 Required 4 Required 5 Required 6 Calc Required 6 Cash Bud Required 7 Required 8 Monthly sales budgets. DIMSDALE SPORTS CO. Sales Budget For January, February, and March 2020 Budgeted Unit Budgeted Budgeted Total Sales Unit Price Dollars January 6,750 $ 56 378,000 February 9,000 56 504,000 March 11,250 56 630,000 Totals for the quarter 27,000 1,512,000 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Calc Required 6 Cash Bud Required 7 Required 8 Monthly merchandise purchases budgets. March Total Next month's budgeted sales (units) Ratio of inventory to future sales Budgeted ending inventory (units) Budgeted units sales for month Required units of available merchandise Beginning inventory (units) Units to be purchased Budgeted cost per unit Budgeted merchandise purchases DIMSDALE SPORTS CO. Merchandise Purchases Budget January, February, and March 2020 January February 9,000 11,250 20% 20% 1,800 2,250 6,750 9,000 8,550 11,250 5,000 1,800 3,550 9,450 $ 20 $ 20 $ $ 71,000 $ 189,000 $ 10,000 20% 2,000 11,250 13,250 2,250 11,000 20 $ 220,000 $ 24,000 20 480,000 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Calc Required 6 Cash Bud Required 7 Required 8 Monthly selling expense budgets. Total DIMSDALE SPORTS COMPANY Selling Expense Budget January, February, and March 2020 January February $ 378,000 $ 504,000 20% 20% 75,600 100,800 6,000 6,000 $ 81,600 $ 106,800 March 630,000 Budgeted sales $ Sales commission percent 20% Sales commissions $ Sales salaries Total budgeted selling expenses 126,000 6,000 132,000 302,400 18,000 320,400 $ $ Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Calc Required 6 Cash Bud Required 7 Required 8 Monthly general and administrative expense budgets. Total Equipment - beginning of month Equipment purchases Equipment - end of month January February $ 552,000 $ 583,200 31,200 100,800 $ 583,200 $ 684,000 $ 6,075 $ 7,125 March $ 684,000 21,600 $ 705,600 $ 7,350 Monthly depreciation expense $ 20,550 DIMSDALE SPORTS CO. General and Administrative Expense Budget Depreciation expense $ January, February, and March 2020 January February $ 6,075 $ 7,125 11,000 11,000 2,200 2,200 $ 19,275 $ 20,325 Salaries expense Maintenance expense March $ 7,350 11,000 2,200 $ 20,550 Total 20,550 33,000 6,600 60,150 Total $ Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Calc Required 6 Cash Bud Required 7 Required 8 Monthly capital expenditures budgets. DIMSDALE SPORTS COMPANY Capital Expenditures Budget January, February, and March 2020 January February March $ 31,200 $ 100,800 $ 21,600 of $ of 150,000 $ 31,200 $ 100,800 $ 171,600 Equipment purchases $ Total 153,600 150,000 303,600 Land purchase Total $ Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Calc Required 6 Cash Bud Required 7 Required 8 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.) March 11,250 Calculation of Cash receipts from customers: January Sales in units 6,750 Selling price per unit | $ 56.00 Total budgeted sales $ 378,000 Cash sales 20% 75,600 Sales on credit 80% $ 302,400 February 9,000 $ 56.00 $ $ 504,000 $ 100,800 $ 403,200 $ 630,000 126,000 504,000 ------------------Collected in------------ January February March $ 120,000 $ 400,000 March 31 Receivable Total 520,000 Accounts Receivable - January 1 $ Credit sales from: January $ 190,512 $ 302,400 403,200 504,000 $ $ 111,888 254,016 0 149,184 February March 504,000 653,184 Total collection of receivables $ 120,000 $ 590,512 $ 365,904 $ Total cash receipts from customers Current month's cash sales Collections of receivables Total cash receipts Total cash receipts from customers January February $ 75,600 $ 100,800 120,000 590,512 $ 195,600 $ 691,312 March $ 126,000 365,904 $ 491,904 Calculation of payments for merchandise: Desired ending inventory (units) $ $ Budgeted sales in units Total units required January $ 1,800 $ 6,750 8,550 5,000 3,550 $ 20 $ 71,000 February $ 2,250 $ 9,000 11,250 1,800 9,450 $ 20 $ 189,000 March 2,000 11,250 13,250 2,250 11,000 20 220,000 Beginning inventory (units) Number of units to be purchased Cost per unit Total cost of purchases $ $ ---------------Paid in-------- January February $ 60,000 $ 295,000 March 31 Payable Total 355,000 March $ Accounts Payable - January 1 Merchandise purchases in: January 71,000 $ $ 14,200 56,800 37,800 February March 189,000 220,000 151,200 220,000 Total cash paid for merchandise Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Requieu - Reque nequeue Required Required 4 Required 5 Required 6 Calc Required 6 Cash Bud Required 7 Required 8 Monthly cash budgets. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Round your final answers to the nearest whole dollar.). March DIMSDALE SPORTS CO. Cash Budget January, February, and March 2020 January February Beginning cash balance $ 35,500 Cash receipts from customers Total cash available Cash payments for: Total cash payments Preliminary cash balance Ending cash balance Loan balance Loan balance January February March Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Calc Required 6 Cash Bud Required 7 Required 8 Budgeted income statement for the entire first quarter (not for each month). (Round your final answers to the nearest whole dollar.). DIMSDALE SPORTS CO. Budgeted Income Statement For Three Months Ended March 31, 2020 Operating expenses Total operating expenses Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Calc Required 6 Cash Bud Required 7 Required 8 Budgeted balance sheet as of March 31, 2020. (Round your final answers to the nearest whole dollar.) DIMSDALE SPORTS CO. Budgeted Balance Sheet March 31, 2020 Assets Total current assets Equipment, net Total assets Liabilities and Equity Liabilities Bank loan payable Total liabilities Stockholders' Equity Total Stockholders' Equity Total Liabilities and Equity
