PLEASE ENSURE THAT YOU SHOW A SCREENSHOT OF THE LINKED EXCEL FORMULAS! IMPORTANT!
PROBLEM: COMPLETING A MASTER BUDGET chandising operation that prepares its master budget on a quarterly basis. The following data are for preparation of a second-quarter master budget for Rocket Company, a mer Ar the end of the previous quarter (March 31). the organization's balance sheet showed the follow- REVIEW . ing account balances -- Cash... Accounts receivable Inventory Buildings and equipment (net) Accounts payable Common shares Retained earnings $ 9,000 48,000 12,600 214,100 $ 18,300 190,000 75.400 $283,700 $283.700 Actual sales for March and budgeted sales for April through July are as follows: March (actual April May June July $60,000 $70,000 $85,000 $90.000 $50,000 Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following the sale. The accounts receivable at March 31 are a result of March credit sales. The company's gross margin is 40% of sales. (In other words, the cost of goods sold is 60% of Monthly expenses are budgeted as follows: salaries and wages. $7,500 per month, shipping. 6% of sales, advertising, $6,000 per month; other expenses, 4% of sales. Depreciation, including depre- ciation on new assets acquired during the quarter, will be $6,000 for the quarter. sales.) Chapter 9 Budgeting & ing month. h. Equipment purchases during the quarter will be as follows: April $11,500, and May $3,000 Dividends totalling $3,500 will be declared and paid in June. Each month's ending inventory should equal 30% of the following month's cost of goods sold. Half of a month's inventory purchases are paid for in the month of purchase and half in the follow 1. Management wants to maintain a minimum cash balance of $8.000. The company has an agree ment with a local bank that allows the company to borrow necessary amounts at the beginning of each month, up to a total loan balance of $20,000. The interest rate is 1% per month. The company will, as far as it is able, repay the loan at the end of each month and must pay interest each month 7 on the total loan balance outstanding for that month. Required: Using the data above, complete the following statements and schedules for the second quarter: 1. Sales budget and a schedule of expected cash collections: March (actual) April May June July Sales Budget Total Sales Cash (20%) Credit (80%) $60,000 $12,000 48.000 $70,000 $14,000 56,000 All credit sales are collected in the month following the sale. May June Total April Schedule of Expected Cash Collections Cash sales .. $14.000 Credit sales .. 48.000 Total collections $62.000 2. a. Merchandise purchases budget: April May June Total $51,000 Budgeted cost of goods sold..... Add desired ending inventory.... Total needs Less beginning inventory Required purchases.. *$70,000 sales x 60% = $42,000 $51,000 x 30% = $15,300 $42,000* 15,300 57,300 12,600 $44,700 b. Schedule of expected cash disbursements for merchandise purchases: April May June Total $18,300 22.350 $18,300 44,700 $22,350 For March purchases.. For April purchases For May purchases For June purchases. Total cash disbursements for purchases $40,650 3. Schedule of expected cash disbursements for selling and administrative expenses: April May June Total Salaries and wages Shipping Advertising Other expenses. Total cash disbursements for selling and administrative expenses $ 7.500 4.200 6,000 2.800 $20,500 4. Cash budget: April May June Total $ 9,000 62.000 71,000 40,650 20,500 11,500 Cash balance, beginning.. Add cash collections. Total cash available. Less cash disbursements: For inventory purchases .... For selling and administrative expenses.... For equipment purchases. For dividends Total cash disbursements Excess (deficiency) of cash Financing Borrowings* Repayments. Interest ** Total financing Cash balance, ending 72,650 $(1,650) 9,747 0 (97) 9,650 $ 8,000 *April: ($1,650) + X -0.01% = $8,000; X = $9,747 (rounded) **April: $9,747 x 1% = $97 5. Prepare an absorption costing income statement for the quarter ending June 30, as shown in Schedule 9. 6. Prepare a balance sheet as at June 30. Create the following components of the Master Budget for ROCKET COMPANY in a Microsoft Excel Spreadsheet for the 2nd Quarter. To get full marks all Excel Cells have to be properly linked using Formulas and proper statement format has to be followed. Prepare ONLY the following budgets. You do not have to do the collection schedules, cash budget or the budgeted balanced sheet. Link the excel formulas so that question 5 can be answered without recreating the entire budget 1. SALES BUDGET-Monthly and in total 2. MERCHANDISE PURCHASE BUDGET-monthly and in total 3. SELLING AND ADMINISTRATION BUDGET-monthly and in total 4. INCOME STATEMENT for the Quarter ended June 30th 5. What would be the operating income if the gross margin is reduced from 40% to 35%? What is the ending merchandise inventory
