Problem 7-23A Preparing a master budget for retail company with no beginning account balances LO 7-2, 7-3, 7-4, 7-5, 7-6 Haas Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2015. 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.&b. October sales are estimated to be $250,000 of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 8 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.

Sales budget october november december

Item	October	November	December
Sales Budget
Cash Sale	100000	108000	116640
Sale on account	150000	162000	174960
Total Budgeted Sale	250000	270000	291600
Schedule of cash recipts
Current cash sale	100000	108000	116640
collection from accounts receivable	-	150000	162000
Total collection	100000	258000	278640

c.&d. 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. (Round your answers to the nearest whole dollar amount.)

inventory purchases budget

budgeted cost of goods sold
plus desired ending inventory
inventory needed
less beginning inventory
required purchases on account
schedule of cash payments budget for inventory purchases
payment of current month's accounts payable
payment for prior month's accounts payable
total budgeted payments for inventory

e.&f. 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 fixtures (fixed)* $ 4,000
Rent (fixed) $ 4,800
Miscellaneous (fixed) $ 1,200

The capital expenditures budget indicates that Haas 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. Prepare a selling and administrative expenses budget and a cash payments budget for selling and administrative expenses. (Round your answers to nearest whole dollar amount.)

October November December

selling and administrative expense budget

salary expense
sales commissions
supplies expense
utilities
depreciation on store fixtures
rent
miscellaneous
total s&a expenses

schedule of cash payments for s&a expenses

salary expense
sales commissions
supplies expense
utilities
depreciation on store fixtures
rent
miscellaneous
total payments for S&A expenses

g. Haas 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 $12,000 cash cushion. Prepare a cash budget. (Any repayments/shortage which should be indicated with a minus sign. Round your answers to nearest whole dollar amount.) Cash Budget

October November December

cash budget

beginning cash balance
add cash receipt
cash available
less payments
for inventory purchases
for s&a expenses
interest expense
purchase of store fixtures
total budgeted payments

Payments minus receipts

shortage
financing activity
borrowing repayment
ending cash balance

h. Prepare a pro forma income statement for the quarter. (Round your answers to nearest whole dollar amount.)

sales revenue
cost of goods sold
gross margin
s&a expenses
operating income
interest expense
net income

i. Prepare a pro forma balance sheet at the end of the quarter. (Amounts to be deducted should be indicated by a minus sign.)

HAAS COMPANY

pro forma income statement

for the quarter ended december 31,2015

assets
cash
acc.receivable
inventory
store fixture
accum. depreciation
book value of fixtures
total assets
liabilities
account payable
sales commissions payable
utilities payable
line of credit liability
equity
retained earning
total liabilities and equity

j. Prepare a pro form statement of cash flow for the quarter

hass company

pro forms statement of cash flows

for the quarter ended december 31, 2015

cash flow from operating activities
cash receipt for inventory
cash payments for s&a expenses
cash payments for interest expense
net cash flows from operating activities
cash flow from investing activities
cash payment for store fixtures
cash flow from financing activities
net flow from line of credit
net increase in cash
plus beginning cash balance
ending cash balance