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Developing a Master Budget for a Merchandising Organization Peyton Department Store prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for 2010. PEYTON DEPARTMENT STORE Balance Sheet March 31, 2010 Assets Liabilities and Stockholders' Equity Cash Accounts receivable Inventory Prepaid Insurance Fixtures Total assets $2,000 Accounts payable $26,000 25,000 Dividends payable 17,000 30,000 2,000 25,000 $84,000 Rent payable Stockholders' equity 1,000 40,000 Total liabilities and equity $84,000 Actual and forecasted sales for selected months in 2010 are as follows: Month Sales Revenue January February March April May June July August $70,000 50,000 40,000 50,000 60,000 70,000 90,000 80,000 Monthly operating expenses are as follows: Wages and salaries Depreciation Utilities Rent $26,000 100 1,000 1,000 Cash dividends of $17,000 are declared during the third month of each quarter and are paid during the first month of the following quarter. Operating expenses, except insurance, rent, and depreciation are paid as incurred. Rent is paid during the following month. The prepaid insurance is for five more months. Cost of goods sold is equal to 50 percent of sales. Ending inventories are sufficient for 120 percent of the next month's sales. Purchases during any given month are paid in full during the following month. All sales are on account, with 50 percent collected during the month of sale, 40 percent during the next month, and 10 percent during the month thereafter. Money can be borrowed and repaid in multiples of $1,000 at an interest rate of 12 percent per year. The company desires a minimum cash balance of $2,000 on the first of each month. At the time the principal is repaid, interest is paid on the portion of principal that is repaid. All borrowing is at the beginning of the month, and all repayment is at the end of the month. Money is never repaid at the end of the month it is borrowed. (a) Prepare a purchases budget for each month of the second quarter ending June 30, 2010. April Peyton Department Store Monthly Purchase Budget Quarter Ending June 30, 2010 May June $Answer Budgeted purchases $Answer Total $Answer $Answer (b) Prepare a cash receipts schedule for each month of the second quarter ending June 30, 2010. Do not include borrowings. April Peyton Department Store Schedule of Monthly Cash Receipts Quarter Ending June 30, 2010 May June $Answer $Answer Total $Answer $Answer Total cash receipts (c) Prepare a cash disbursements schedule for each month of the second quarter ending June 30, 2010. Do not include repayments of borrowings. Peyton Department Store Schedule of Monthly Cash Disbursements Quarter Ending June 30, 2010 April May June $Answer $Answer Total $Answer $Answer Total cash disbursements (d) Prepare a cash budget for each month of the second quarter ending June 30, 2010. Include budgeted borrowings and repayments. April Peyton Department Store Monthly Cash Budget Quarter Ending June 30, 2010 May June Total $Answer $Answer $Answer $Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer $Answer $Answer $Answer $Answer Cash balance, beginning Receipts Disbursements Excess receipts over disb. Balance before borrowings Borrowings Loan repayments Cash balance, ending (e) Prepare an income statement for each month of the second quarter ending June 30, 2010. Peyton Department Store Budgeted Monthly Income Statements Quarter Ending June 30, 2010 April May June Total $Answer $Answer $Answer $Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer $Answer $Answer $Answer $Answer Sales Cost of sales Gross profit Operating expenses: Wages and salaries Depreciation Utilities Rent Insurance Interest Total expenses Net income (f) Prepare a budgeted balance sheet as of June 30, 2010. Assets Peyton Department Store Budgeted Balance Sheet June 30, 2010 Liabilities and Equity $Answer Cash $Answer Merchandise payable Answer Accounts receivable Answer Dividend payable Answer Inventory Answer Rent payable Answer Prepaid insurance Answer Loans payable Assets Peyton Department Store Budgeted Balance Sheet June 30, 2010 Liabilities and Equity Answer Fixtures Answer Interest payable $Answer Total assets Answer Stockholders' equity $Answer Total liab. & equity