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 Campbell 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 $320.000, 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. 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 60 percent of sales. The company desires to maintain a minimum ending inventory equal to 10 percent of the next month's cost of goods sold. However ending yventory of December is expected to be $14,000. Assume that all purchases are made on account. Prepare an inventory purchases budget d. 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 e. Budgeted selling and administrative expenses per month follow. d. 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. e. Budgeted selling and administrative expenses per month follow. Salary expense (fixed) $20,000 Sales comissions 5% of Sales Supplies expense 2X of Sales Utilities (fixed) $ 3,400 Depreciation on store fixtures (fixed) $ 6,000 Rent (fixed) $ 6,800 Miscellaneous (fixed) $ 3,200 The capital expenditures budget indicates that Campbell will spend $256,000 on October 1 for store fixtures, which are expected to have a $40,000 salvage value and a three-year (36-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. g. Campbell 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 1 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $32,000 cash cushion Prepare a cash budget h. Prepare a pro forma income statement for the quarter 1. Prepare a pro forma balance sheet at the end of the quarter, Answer is not complete. Complete this question by entering your answers in the tabs below. Required) Required A Required B Required C Required D Required E Required F Required G Required H Required I October sales are estimated to be $320,000, 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. October November December Sales Budget Cash sales $ 112,000 S 134,400 $ 161 280 Sales on account Thy 208.000 249,600 299,520 Total budgeted sales $ 320,000 $384.000 $460.800 Required B > Answer is not complete. 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 Required I Required 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. October November December Schedule of Cash Receipts Current cash sales $ 112,000 $ 134,400 5 161,280 Plus collections from A/R 0 208.000 249,600 Total collections $ 112,000 $ 342.400 $ 410,880 Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Required Required D Required E Required f Required G Required H Required I Required) The cost of goods sold is 60 percent of sales. The company desires to maintain a minimum ending inventory equal to 10 percent of the next month's cost of goods sold. However, ending inventory of December is expected to be $14,000. Assume that all purchases are made on account. Prepare an inventory purchases budget. October November December Inventory Purchases Budget Budgeted cost of goods sold $ 192.000 $ 230,400 $ 276.480 Plus Desired ending inventory 23.040 27.648 14,000 Inventory needed 215,040 258,048 290.480 Less: Beginning inventory 0 23,040 27.648 Required purchases (on account) $ 215.040 $ 235,008 $ 262.832 Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Required Required D Required E Required F Required G Required H Required 1 Required 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. (Round your final answers to the nearest whole dollar amounts.) November December $ October Schedule Cash Payments Budget for Inventory Purchases Payment of current month's accounts payable $ 129,024 Payment for prior month's accounts payable 0 Total budgeted payments for inventory s 129.024 $ 141,005 86,016 227,021 157,699 94,003 251.702 $ Answer is not complete. 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 Required I R Prepare a selling and administrative expenses budget. November December $ October Selling and Administrative Expense Budget Salary expense $ 20,000 Sales commissions 16,000 Supplies expense 6,400 Utilities 3,400 Depreciation on store fixtures 6.000 Rent 6,800 Miscellaneous 3.200 Total S&A expenses 61,800 20,000 19,200 7.680 3,400 6,000 6.800 3,200 66.280 20,000 23,040 9,216 3,400 6,000 6,800 3,200 71,656 OOOOOO $ $ Required A Required B Required C Required D Required Required F Required G Required H Required 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. November December $ October Schedule of Cash Payments for S&A Expenses Salary expense $ 20.000 Sales commissions 0 Supplies expense 6,400 Utilities 0 Depreciation on store fixtures 0 Rent 6,800 Miscellaneous 3.200 $ 36.400 Total payments for S&A expenses 20,000 $ 16,000 7.680 3,400 20,000 19,200 9.216 3,400 0 OOOOO 0 >ISIS 6,800 3.200 57,080 6,800 3.200 61.816 S $ Cash Budget October November December $ 0 112,000 112,000 342,400 342,400 410,880 410,880 Section 1: Cash Receipts Beginning cash balance Add: Cash receipts Total cash available Section 2 Cash Payments For inventory purchases For seling and administrative expenses Interest expense Purchase of store fixtures 227,021 57,080 129,024 36,400 0 256.000 251,702 61 816 0 0 421,424 284,101 313 518 Total budgeted disbursements Section 3. Financing Activities (309,424) 58,299 97.362 $ (309.424) $ 58.299 5 97362 Check my work mode: This shows what is correct or incorrec Required A Required B Required C Required D Required E Prepare a pro forma income statement for the quarter. CAMPBELL COMPANY Pro Forma Income Statement For the Quarter Ended December 31, Year 1 Sales revenue $ 1.164.800 Cost of goods sold 698,880 Gross margin 465.920 Selling and administrative 199.736 expenses Operating income 266 184 Interest expense Net income S 266.184 * Required Assets Accounts receivable 299,520 126,462 14,000 Cash Inventory Store fixtures is 238,000 X 238.000 $ 677.982 Total assets 15 Liabilities Accounts payable Sales commissions payable Utilities payable ISI 105 133 23,040 3.400 Equity Retained earnings 256 444 X Total liabilities and equity $ 388.017 Pro Forma Statement of Cash Flows For the Quarter Ended December 31, Year 1 Cash flows from operating activities $ 457,600 (427 728) (180,019) Cash payments for selling and administrative expenses (155,296) Net cash flows from operating activities Cash flows from investing activities Cash payment for store fixtures Cash flow from financing activities Cash payments for interest expense $ (305,443) (256,000) (9.740) $ 0