Problem 7 22A Preparing a master budget for retail company with no beginning account balances LO 3, 4, 5 Patel Company is a retail company that specializes in selling outdoor camping equipment The company is considering opening a new store on October 1, 2012 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 h Prepare a pro forma income statement for the quarter (Amounts to be deducted should be indicated with a minus sign Omit the $ sign in your response ) Patel Company Pro Forma Income Statement For the Quarter Ended December 31, 2012 (Click to select)Rent expense Cost of goods sold S A expenses Interest expense Sales revenue $ (Click to select)Cost of goods sold S A expenses Rent expense Interest expense Sales revenue (Click to select)Gross margin Gross loss (Click to select)Rent expense S A expenses Cost of goods sold Interest expense Sales revenue (Click to select)Operating income Operating loss (Click to select)Rent expense Interest expense Sales revenue Cost of goods sold S A expenses (Click to select)Gross income(loss) Net income(loss) $ i Prepare a pro forma balance sheet at the end of the quarter (Be sure to list the assets and liabilities in order of their liquidity Amounts to be deducted should be indicated with a minus sign Omit the $ sign in your response ) Patel Company Pro Forma Balance Sheet December 31, 2012 Assets (Click to select)Accounts receivable Book value of fixtures Inventory Accumulated depreciation Cash Store fixtures $ (Click to select)Store fixtures Accounts receivable Book value of fixtures Cash Accumulated depreciation Inventory (Click to select)Retained earnings Store fixtures Book value of fixtures Cash Accumulated depreciation Inventory (Click to select)Store fixtures Cash Accounts receivable Accumulated depreciation Inventory Retained earnings $ (Click to select)Accumulated depreciation Inventory Cash Store fixtures Accounts receivable Retained earnings (Click to select)Book value of fixtures Retained earnings CashStore fixtures Accounts receivable Inventory Total assets $ Liabilities (Click to select)Utilities payable Accounts payable Cash Accounts receivable Sales commissions payable Line of credit liability $ (Click to select)Sales commissions payable Accounts receivable Line of credit liability (Click to select)Utilities payable Accounts receivable Sales commissions payable Line of credit liability Accounts payable Cash (Click to select)Accounts receivable Cash Accounts payable Utilities payable Line of credit liability Sales commissions payable Equity (Click to select)Accounts receivable Sales commissions payable Retained earnings Store fixtures CashInventory Total liabilities and equity $ j Prepare a pro forma statement of cash flows for the quarter (Leave no cells blank be certain to enter 0 wherever required Amounts to be deducted should be indicated with a minus sign Omit the $ sign in your response ) Patel Company Pro Forma Statement of Cash Flows For the Quarter Ended December 31, 2012 Cash flows from operating activities (Click to select)Cash receipts from customers Cash payments for inventory Cash payment for store fixtures Cash payments for rent Cash payments for interest expense Cash payments for S A expenses $ (Click to select)Cash receipts from customers Cash payments for inventory Cash payments for interest expense Cash payments for rent Cash payments for S A expenses Cash payment for store fixtures (Click to select)Cash payment for store fixtures Cash payments for S A expenses Cash payments for interest expense Cash payments for inventory Cash payments for rent Cash receipts from customers (Click to select)Cash payments for S A expenses Cash payments for interest expense Cash payment for store fixtures Cash receipts from customers Cash payments for inventory Cash payments for rent Net cash flows from operating activities $ Cash flows from investing activities (Click to select)Cash payment for store fixtures Cash payments for inventory Cash receipts from customers Cash payments for interest expense Cash payments for rent Cash payments for S A expenses Cash flow from financing activities (Click to select)Cash payments for inventory Cash payments for interest expense Cash payment for store fixtures Net Inflow from line of credit Cash payments for S A expenses Cash receipts from customers (Click to select)Net decrease in cashNet increase in cash (Click to select)Less Beginning cash balance Cash payments for S A expenses Plus Beginning cash balance Cash payments for inventory Cash payments for interest expense Cash receipts from customers (Click to select)Cash payments for inventory Cash receipts from customers Net cash flows from operating activities Ending cash balance Cash payments for interest expense Cash payments for S A expenses $ IMPORTANT INFO Required a b October sales are estimated to be $120,000 of which 40 percent will be cash and 60 percent will be credit The company expects sales to increase at the rate of 25 percent per month The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale Prepare a sales budget and a schedule of cash receipts (Leave no cells blank be certain to enter 0 wherever required Omit the $ sign in your response ) 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 months cost of goods sold Ending inventory of December is expected to be $12,000 The company pays 70 percent of accounts payable in the month of purchase and the remaining 30 percent in the following month Assume that all purchases are made on account Prepare an inventory purchases budget and a cash payments budget for inventory purchases (Leave no cells blank be certain to enter 0 wherever required Input all amounts as positive values Omit the $ sign in your response ) Budgeted selling and administrative expenses per month follow Salary expense (fixed) $ 18,000 Sales commissions 5 percent of Sales Supplies expense 2 percent of Sales Utilities (fixed) $ 1,400 Depreciation on store equipment (fixed) $ 4,000 Rent (fixed) $ 4,800 Miscellaneous (fixed) $ 1,200 The capital expenditures budget indicates that Patel will spend $164,000 on October 1 for store fixtures, which are expected to have a $20,000 salvage value and a three year (36 month) useful life 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 Use this information to prepare a selling and administrative expenses budget and a cash payments budget for selling and administrative expenses ( Leave no cells blank be certain to enter 0 wherever required Omit the $ sign in your response )

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Problem 7-22A Preparing a master budget for retail company with no beginning account balances [LO 3, 4, 5] Patel Company is a retail company that

Problem 7-22A Preparing a master budget for retail company with no beginning account balances [LO 3, 4, 5] Patel Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2012. 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.

h.	Prepare a pro forma income statement for the quarter. (Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)

Patel Company Pro Forma Income Statement For the Quarter Ended December 31, 2012
(Click to select)Rent expense/Cost of goods sold/S&A expenses/Interest expense/Sales revenue	$
(Click to select)Cost of goods sold/S&A expenses/Rent expense/Interest expense/Sales revenue
(Click to select)Gross margin/Gross loss
(Click to select)Rent expense/S&A expenses/Cost of goods sold/Interest expense/Sales revenue
(Click to select)Operating income/Operating loss
(Click to select)Rent expense/Interest expense/Sales revenue/Cost of goods sold/S&A expenses
(Click to select)Gross income(loss)/Net income(loss)	$

i.	Prepare a pro forma balance sheet at the end of the quarter. (Be sure to list the assets and liabilities in order of their liquidity. Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)

Patel Company Pro Forma Balance Sheet December 31, 2012
Assets
(Click to select)Accounts receivable/Book value of fixtures/Inventory/Accumulated depreciation/Cash/Store fixtures		$
(Click to select)Store fixtures/Accounts receivable/Book value of fixtures/Cash/Accumulated depreciation/Inventory
(Click to select)Retained earnings/Store fixtures/Book value of fixtures/Cash/Accumulated depreciation/Inventory
(Click to select)Store fixtures/Cash/Accounts receivable/Accumulated depreciation/Inventory/Retained earnings	$
(Click to select)Accumulated depreciation/Inventory/Cash/Store fixtures/Accounts receivable/Retained earnings

(Click to select)Book value of fixtures/Retained earnings/CashStore fixtures/Accounts receivable/Inventory

Total assets		$

Liabilities
(Click to select)Utilities payable/Accounts payable/Cash/Accounts receivable/Sales commissions payable/Line of credit liability		$
(Click to select)Sales commissions payable/Accounts receivable/Line of credit liability
(Click to select)Utilities payable/Accounts receivable/Sales commissions payable/Line of credit liability/Accounts payable/Cash
(Click to select)Accounts receivable/Cash/Accounts payable/Utilities payable/Line of credit liability/Sales commissions payable
Equity
(Click to select)Accounts receivable/Sales commissions payable/Retained earnings/Store fixtures/CashInventory

Total liabilities and equity		$

j.	Prepare a pro forma statement of cash flows for the quarter. (Leave no cells blank - be certain to enter "0" wherever required. Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)

Patel Company Pro Forma Statement of Cash Flows For the Quarter Ended December 31, 2012
Cash flows from operating activities
(Click to select)Cash receipts from customers/Cash payments for inventory/Cash payment for store fixtures/Cash payments for rent/Cash payments for interest expense/Cash payments for S&A expenses	$
(Click to select)Cash receipts from customers/Cash payments for inventory/Cash payments for interest expense/Cash payments for rent/Cash payments for S&A expenses/Cash payment for store fixtures
(Click to select)Cash payment for store fixtures/Cash payments for S&A expenses/Cash payments for interest expense/Cash payments for inventory/Cash payments for rent/Cash receipts from customers
(Click to select)Cash payments for S&A expenses/Cash payments for interest expense/Cash payment for store fixtures/Cash receipts from customers/Cash payments for inventory/Cash payments for rent

Net cash flows from operating activities		$
Cash flows from investing activities
(Click to select)Cash payment for store fixtures/Cash payments for inventory/Cash receipts from customers/Cash payments for interest expense/Cash payments for rent/Cash payments for S&A expenses
Cash flow from financing activities
(Click to select)Cash payments for inventory/Cash payments for interest expense/Cash payment for store fixtures/Net Inflow from line of credit/Cash payments for S&A expenses/Cash receipts from customers

(Click to select)Net decrease in cashNet increase in cash
(Click to select)Less: Beginning cash balance/Cash payments for S&A expenses/Plus: Beginning cash balance/Cash payments for inventory/Cash payments for interest expense/Cash receipts from customers

(Click to select)Cash payments for inventory/Cash receipts from customers/Net cash flows from operating activities/Ending cash balance/Cash payments for interest expense/Cash payments for S&A expenses		$

***** IMPORTANT INFO *****

Required:

a.&b.

October sales are estimated to be $120,000 of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 25 percent per month. The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. Prepare a sales budget and a schedule of cash receipts. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

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 months cost of goods sold. Ending inventory of December is expected to be $12,000. The company pays 70 percent of accounts payable in the month of purchase and the remaining 30 percent in the following month. Assume that all purchases are made on account. Prepare an inventory purchases budget and a cash payments budget for inventory purchases. (Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive values. Omit the "$" sign in your response.)

Budgeted selling and administrative expenses per month follow.


Salary expense (fixed)	$	18,000
Sales commissions		5	percent of Sales
Supplies expense		2	percent of Sales
Utilities (fixed)	$	1,400
Depreciation on store equipment (fixed)*	$	4,000
Rent (fixed)	$	4,800
Miscellaneous (fixed)	$	1,200

*	The capital expenditures budget indicates that Patel will spend $164,000 on October 1 for store fixtures, which are expected to have a $20,000 salvage value and a three-year (36-month) useful life.

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. Use this information to prepare a selling and administrative expenses budget and a cash payments budget for selling and administrative expenses. ( Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)