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Summer Breeze Inc. (SBI) is a retail outlet specializing in equipment and apparel for the summer months. SBI is trying to prepare a comprehensive budget

Summer Breeze Inc. (SBI) is a retail outlet specializing in equipment and apparel for the summer months. SBI is trying to prepare a comprehensive budget for the first quarter of 2016. SBI has accumulated the following data:

Balance Sheet as of December 31, 2015

(Actual Values)

Assets

Liabilities and Equity

Cash

$ 18,000

Accounts Payable

$ 45,000

Accounts Receivable

95,000

Other Payables

30,400

Inventory

40,000

Common Stock

425,000

Fixed Assets, net

500,000

Retained Earnings

152,600

Total Assets

$653,000

$653,000

SBI sales are seasonal, growing through June and then declining through the rest of the year.

December 2015 sales were $200,000. November 2015 sales were $150,000.

Cost of goods sold is 60% of sales.

Fixed Selling, General & Administrative Expenses are $80,000 per month. Variable selling expenses (commissions) are 8% of sales. SG&A are paid in the month incurred. Commissions are paid the following month.

Depreciation is $192,000 annually.

Other Payables on the December 31, 2015 Balance Sheet includes Taxes Payable - $10,400 and Commissions Payable - $20,000.

The Income Tax rate is 40%. Taxes are paid the month after they are incurred.

SBIs inventory policy is to maintain enough inventory to meet 20% of next months sales.

Sales are collected 60% in the current month, 30% in the month after sale and 10% in the second month after sale.

Purchases are paid 75% in the month of purchase and 25% in the month after purchase.

SBI has a line of credit with a local bank. The line of credit has a $100,000 limit and 6% rate. Borrowings are made on the last day of the month. Interest Expense is recognized the following month. Interest is paid the month after the expense is recognized.

SBIs policy is to maintain a minimum cash balance of $15,000

SBI pays an $800 dividend to its shareholders each month.

Projected sales are as follows:

Sales Budget

January

February

March

April

May

Sales

$300,000

$520,000

$660,000

$900,000

$920,000

Use the information above to prepare SBIs comprehensive budget for the first quarter of 2016. SBIs budgets follow the format on the following pages. Round all balances to the nearest dollar.

Master Budget (Continued)

Summer Breeze Inc. Budget Template

Budgeted Income Statement

January

February

March

Totals

Sales

Variable Costs:

Cost of Goods Sold

Commissions

Contribution Margin

Fixed S,G&A Expenses

Depreciation

Income Before Interest

Interest Expense

Income Before Tax

Tax Expense

Net Income

Purchases Budget

January

February

March

Totals

Cost of Goods Sold

Desired Ending Inventory

Total Needs

Beginning Inventory

Total Purchases

Cash Receipts Budget

January

February

March

Totals

Sales

Cash Collections:

Current Month

1 Month Prior

2 Months Prior

Total Collections

Cash Disbursements

January

February

March

Totals

Purchases

Payments for Purchases:

Current Month

1 Month Prior

SG&A Expenses Paid

Commissions Paid

Interest Paid

Taxes Paid

Dividends Paid

Total Disbursements

Master Budget (Continued)

Summer Breeze Inc. Budget Template

Cash Budget

January

February

March

Totals

Cash Receipts

Cash Disbursements

Excess/(Deficiency)

of Cash

Beginning Balance

Projected Ending Balance

Borrowing/(Repayments) on Line of Credit

Ending Cash Balance

Balance Sheet as of March 31, 2016

Assets

Liabilities and Equity

Cash

Accounts Payable

Accounts Receivable

Commissions Payable

Inventory

Taxes Payable

Interest Payable

Notes Payable (Line of Credit)

Fixed Assets, net

Common Stock

Retained Earnings

Total Assets

Total Liabilities & Equity

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