Problem 14-23A (Algo) Preparing a master budget for retail company with no beginning account balances LO 14-2, 14-3, 14-4, 14-5, 14-6 Baird 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 a. October sales are estimated to be $300,000, of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 20 percent per month. Prepare a sales budget b. 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. C. 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 month's cost of goods sold. However, ending inventory of December is expected to be $12,100 Assume that all purchases are made on account Prepare an inventory purchases budget d. 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 e. Budgeted selling and administrative expenses per month follow. Salary expense (fixed) $18, 100 Sales commissions 4% of Sales Supplies expense 2% of Sales Utilities (fixed) $ 1,500 Depreciation on store fixtures (fixed) $4,100 Rent (fixed) $ 4,900 Miscellaneous (fixed) $ 1,300 The capital expenditures budget indicates that Baird will spend $119,400 on October 1 for store fixtures, which are expected to have a $21000 salvage value and a two-year (24-month) useful life. Use this information to prepare a selling and administrative expenses budget. f. 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. 9. Baird borrows funds, in increments of $1000, 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 $13,000 cash cushion Prepare a cash budget. h. Prepare a pro forma income statement for the quarter. I. Prepare a pro forma balance sheet at the end of the quarter. j. Prepare a pro forma statement of cash flows for the quarter. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E Required F Required G Required H Requiredt Required) 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. October November December Schedule of Cash Payments for S&A Expenses Salary expense IS 18.100 18,100 $ 18.100 Sales commissions 12,000 3 14,400 17.280 Supplies expense 6.000 7.200 8.640 Utilities 1,500 1,500 1,500 Depreciation on store fixtures 0 0 Rent 4,900 4,900 4.900 Miscellaneous 1.300 1.300 1,300 Total payments for S&A expenses $ 43.800 s 47.400 S 51,720 O Show le November December IS s Cash Budget October Section 1: Cash Receipts Beginning cash balance 0 Add: Cash receipts 120,000 Total cash available 120,000 Section 2: Cash Payments For inventory purchases 208,320 For selling and administrative expenses 30,300 Purchase of store foxtures 119,400 Interest expense 420 13,560 324,000 337,560 30,396 388,800 419, 196 > 261,744 255,632 48,840 45,000 0 0 420 391 358,440 307,164 304.863 Total budgeted disbursements Section 3: Financing Activities Borrowing (repayment) Borrowing (repayment) Ending cash balance 30.396 114,333 (238.440) 252,000 13,560 0 $ 30.396 $ 114,333 Required A Required B Required C Required D Required E Required F. Required Required H Required I Required) Prepare a pro forma income statement for the quarter. BAIRD COMPANY Pro Forma Income Statement For the Quarter Ended December 31, Year 1 Sales revenue $ 1,067,500 Cost of goods sold 640,500 Gross margin 427,000 Selling and administrative 186.925 expenses Operating income 240,075 Interest expense 9,350 Net income IS 230,725 IS Pro Forma Balance Sheet December 31, Year 1 Assets Cash Accounts receivable Inventory Store fixtures Accumulated depreciation Olol lol 28,000 X 240,625 X 13,600 X 237,600 X 16,800 X 254,400 $ 536,625 Total assets Liabilities 49,970 X Ol 3,000 X Accounts payable Utilities payable Sales commissions payable Line of credit liability Equity 21,875 X 197,455 0 Retained earnings Total liabilities and equity 230.725 X $ 503,025 Required F Required G Required H Required 1 Required) Required A Required B Required C Required D Required E Prepare a pro forma statement of cash flows for the quarter. (Cash outflows should be indicated with a minus sign.) BAIRD COMPANY Pro Forma Statement of Cash Flows For the Quarter Ended December 31, Year 1 Cash flows from operating activities $ 826,875 145.250 9,350 $ 981.475 Net cash flows from operating activities Cash flows from investing activities 68.145 3 Cash flow from financing activities 237,600 197 455 28,000 $ 225,455