Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please help, thank you! Problem 7-8AA Merchandising: Preparation of a complete master budget LO P4 Near the end of 2017, the management of Dimsdale Sports
Please help, thank you!
Problem 7-8AA Merchandising: Preparation of a complete master budget LO P4 Near the end of 2017, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2017 DIMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2017 Assets $ 36,000 520,000 165,000 Cash Accounts receivable Inventory Total current assets Equipment Less: accumulated depreciation Equipment, net 721,000 588,000 73,500 514,500 $1,235,500 Total assets Liabilities and Equity Accounts payable Bank loan payable Taxes payable (due 3/15/2018) Total liabilities Common stock 355,000 14,000 89,000 458,000 473,000 304,500 Retained earnings Total stockholders' equity 777,500 $1,235,500 Total liabilities and equity To prepare a master budget for January, February, and March of 2018, management gathers the following information a. The company's single product is purchased for $30 per unit and resold for $56 per unit. The expected inventory level of 5,500 units on December 31, 2017, is more than management's desired level, which is 20% of the next month's expected sales (in units) Expected sales are: January, 7,500 units; February, 9,000 units; March, 11,000 units; and April, 9,500 units. b. Cash sales and credit sales represent 25% and 75%, 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, 2017, accounts receivable balance, $125,000 is collected in January and the remaining $395,000 is collected in February. 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, 2017, accounts payable balance, $85,000 is paid in January and the remaining $270,000 is paid in February. d. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $78,000 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, 2017, balance sheet was purchased in January 2017. 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, $33,600; February, $100,800; and March, $24,000. This equipment will be depreciated under the straight- line method over eight years with no salvage value. A full month's 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 $29,560 at the end of each month . The income tax rate for the company is 37%. Income taxes on the first quarter's income will not be paid until April 15 Required: Prepare a master budget for each of the first three months of 2018; 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, 2018. Answer is not complete. Complete this question by entering your answers in the tabs below. Required 6 Calc Required 6 Cash Bud Required 1 Required 4 Required 5 Required 7 Required 8 Required 2 Required 3 Monthly general and administrative expense budgets. February January March Equipment -beginning of month $ 722,400 $ 588,000 $ 621,600 Equipment purchases 33,600 100,800 24,000 $ 722,400 $ 621,600 $746,400 Equipment - end of month Monthly depreciation expense DIMSDALE SPORTS CO. General and Administrative Expense Budget January, February, and March 2018 March January February Maintenance expense 2,200 2,200 2,200 6,600 Salaries expense 11,000 $ 13,200 2,200 $ 2,200 6,600 Total Answer is not complete. Complete this question by entering your answers in the tabs below. Required 6 Cash Bud Required 6 Calc Required 2 Required 3 Required 4 Required 7 Required 1 Required 5 Required 8 Monthly capital expenditures budgets. DIMSDALE SPORTS COMPANY Capital Expenditu res Budget January, February, and March 2018 January February March TotalStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started