Required information Problem 14-23 Preparing a master budget for retail company with no beginning account balances LO 14 2, 14-3, 14-4,14-5, 14-6 The following information applies to the questions displayed below Vernon Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2019. 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: Problem 14-23 Part 1 Required a. October sales are estimated to be $280,000, of which 45 percent will be cash and 55 percent will be credit. The company expects sales to increase at the rate of 25 percent per month. Prepare a sales budget. Prepare a schedule of cash receipts the next month's cost of goods sold. However, ending inventory of December is expected to be $13,600. Assume that all purchases b. The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. 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 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) Sales commissions Supplies expense Utilities (fixed) Depreciation on store fixtures (fixed)* Rent (fixed) Miscellaneous (fixed) $19,600 5 % of Sales 2 % of Sales $ 3,000 $5,600 $ 6,400 $ 2,800 The capital expenditures budget indicates that Vernon will spend $237,600 on October 1 for store fixtures, which are expected to have a $36,000 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. Vernon 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 $28,000 cash cushion. Prepare a cash budget. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required ARequired B Required C Required D Required E Required FRequired G October sales are estimated to be $280,000, of which 45 percent will be cash and 55 percent will be credit. The company expects sales to increase at the rate of 25 percent per month. Prepare a sales budget. October November December Sales Budget Cash sales Sales on account Total budgeted sales $ 126,000 s 157.500 s 196,875 154,000 192.500. 240,625 $ 280,000 350,000 437,500 126,000 157.500 196,875 Required A Required B > Answer is complete but not entirely correct. Required C Complete this question by entering your answers in the tabs below. Required ARequired Rqired Reqired D Required E Required FRequired G 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 Plus collections from A/R Total collections 126 000 os 157.5000$ 196.8750 54,000 192,500 S 126,000 311,500 $389,375 154000 192.500 Required A Required C Complete this question by entering your answers in the tabs below Required A Required B Required C E Required D Required E Required F Required G 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 $13,600. Assume that all purchases are made on account. Prepare an inventory purchases budget October November December Inventory Purchases Budget Budgeted cost of goods sold Plus: Desired ending inventory Inventory needed Less: Beginning inventory Required purchases (on account) $ 168,000 210,000S 262,500 21,000 | 26,250 13,600 276,100 021000 26,250 $ 189,000 215,250 249,850 189,000 236,250 Required B Required D Required A Required B Required C Required DRequired E Required F Required G 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. (Round your final answers to the nearest whole dollar amounts) October November December Schedule of Cash Payments Budget for Inventory Purchases Payment of current month's accounts $ 151,200172,200$ 199,880 payable Payment for prior month's accounts payable Total budgeted payments for inventory1 037,800 3.050 $ 151,200 210,000 242,930 Required C Required E 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 Prepare a selling and administrative expenses budget 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 $ 19,600$ 19,600 19,600 0007,50021,875 5,600. 7,000 8,750 3,000 5,6005,600 4006,4006,400 2002,8002,800 $ 57,000 61,900 68,025 3,000 3,000 Required D Required F > Required A Required B Required C Required DRequired E Required F Required G 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 Sales commissions Supplies expense Utilities Depreciation on store fixtures Rent Miscellaneous Total payments for S&A expenses $ 19,600$19,600 19,600 01400017,500 8,750 3,0003,000 5,7 ,0008 6,406,400 2,8002,800 6,400 2,800 52,800 58,050 $ 34,400 K Required E Required G> Required A Required B Required C Required D Required E Required F Required G Vernon 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 $28,000 cash cushion. Prepare a cash budget. (Any repayments/shortage which should be indicated with a minus sign.) Show less Cash Budget October Beginning cash balance Add: Cash receipts Cash available Less: Payments November 0$28,800 318,500 347,300 December 28,000 398,125 426,125 154,000 154,000 15120210,000242,930 For inventory purchases For selling and administrative expenses34,40052,80058,050 Purchase of store fixtures Interest expense 237,600 02,980 2,445 423,200 265,780 303,425 Total budgeted payments Payments minus receipts Surplus (shortage) Financing activity (269,200) 81,520 122,700 94,700 $28,800 28,000 28,000 298,000 53,520 Borrowing (repayment) Ending cash balance Required H Required 1 Required Prepare a pro forma income statement for the quarter. VERNON COMPANY Pro Forma Income Statement For the Quarter Ended December 31, 2019 Sales revenue Cost of goods sold Selling and administrative expenses Operating income Interest expense Net income Required H Required I Required HRequired I Required J Prepare a pro forma balance sheet at the end of the quarter. (Amounts to be deducted sh VERNON COMPANY Pro Forma Balance Sheet December 31, 2019 Assets Cash Accounts receivable Inventory Less: Accumulated depreciation Total assets 0 Liabilities Accounts payable Equity Retained earnings Total lties and equity Reauired Reauired Required H Required I Required Prepare a pro forma statement of cash flows for the quarter. (Amounts to be deducted should be indicatec VERNON COMPANY Pro Forma Statement of Cash Flows For the Quarter Ended December 31, 2019 Cash flows from operating activities Cash receipts from customers Cash payments for inventory Net cash flows from operating activities Cash flows from investing activities Cash flow from financing activities Required I Required J