Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

October sales are estimated to be $ 3 5 0 , 0 0 0 , of which 3 5 percent will be cash and 6

October sales are estimated to be $350,000, of which 35 percent will be cash and 65 percent will be credit. The company expects sales to increase at the rate of 20 percent per month. Prepare a sales budget.
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.
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 $13,100. Assume that all purchases are made on account. Prepare an inventory purchases budget.
The company pays 60 percent of accounts payable in the month of purchase and the remaining 40 percent in the following month. Prepare a cash payments budget for inventory purchases.
Budgeted selling and administrative expenses per month follow:
Salary expense (fixed) $ 19,100
Sales commissions 4% of Sales
Supplies expense 2% of Sales
Utilities (fixed) $ 2,500
Depreciation on store fixtures (fixed)* $ 5,100
Rent (fixed) $ 5,900
Miscellaneous (fixed) $ 2,300
*The capital expenditures budget indicates that Rundle will spend $153,400 on October 1 for store fixtures, which are expected to have a $31,000 salvage value and a two-year (24-month) useful life.
Use this information to prepare a selling and administrative expenses budget.
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.
Rundle 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 $23,000 cash balance. Prepare a cash budget.

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

Financial Accounting Tools For Business Decision Making

Authors: Paul D. Kimmel

4th Canadian Edition

0470155353, 978-0470155356

More Books

Students also viewed these Accounting questions

Question

If you were Rob Whittier, how would you resolve this dispute?

Answered: 1 week ago