The Chippewa Chocolates (CC) Company began business on January 1st, 2020. After its first year of operation, CCs president, Allen Hale, is now trying to prepare the companys master budget for the first two months (January and February) of 2021. Since you are his good friend and an accounting student, Mr. Hale has asked you to prepare the budget.
Based on the budgets from 2020, Mr. Hale has gathered the following information:
- Projected Sales for January 2021 $126,800
- Average Monthly Sales Increase 4%
- Average Monthly Salary Expenses $ 34,200
- Average Monthly Rent Expenses $ 5,600
- Average Monthly Utility Expenses $ 6,520
- Average Monthly Misc. Expense $ 2,700
- Supplies Expense-percent of sales 3%
- Commission-percent of sales 5%
Begin your project by carefully reading all instructions given here and reviewing the balance sheets and budget worksheets contained in the Excel workbook.
Fill in the data table in the upper left hand corner of the Budgets worksheet (found on the second tab in the Excel workbook) with the values above and other values found in the assumptions given below. Using this information, prepare Chippewa Chocolates master budget for the first two months of 2021. All amounts should be rounded to whole dollars as necessary. Apply the following assumptions:
- Customers typically pay 54% of total sales in cash and put the remaining 46% on account. The company expects to collect 100% of the credit sales in the month following the sale.
- The cost of goods sold is 34% of budgeted sales and the company desires to maintain a minimum ending inventory equal to 30% of the next months cost of goods sold. All purchases are made on account.
- The company pays 75% of inventory purchases in the month of purchase and the remaining 25% in the following month.
- Depreciation expense on existing equipment is $2,300 each month. In addition, CC will spend $250,000 on January 1 for additional equipment. The equipment is expected to have a $10,000 salvage value and a ten-year (120-month) useful life.
- Salaries, 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.
- The company borrows and repays funds on its credit line in increments of $1,000 on the last day of each month as necessary to maintain its targeted $43,000 cash balance. It pays interest of .4% per month in cash on the last day of the month on cash borrowed in the prior month.
Word File Edit Table Window View Insert BS Format Tools E AutoSave Help Project Worksheets-521-1 Analytic Solver Tell me Home Insert Draw Page Layout Formulas Data Review View Calibr (Body) 11 ' Wrap Text Custom Paste B TU BE SA ===== El Meron en $% 18 X D G mum required cash balance Monthly interest rate CHIPPEWA CHOCOLATES Sales Budget For the Three Months Ending March 31, 2021 CHIPPEWA CHOCOLATES Schedule of Cach Payments for SEA Expenses For the Two Months Ending February 28, 2021 January February January February March Variable costs Sales red Sales atal Sales Total variable costs Fixed Totalfred costs Cash paid for S&A Expenses CHIPPEWA CHOCOLATES Schedule of Cash Receipts For the Two Months Ending February 28, 2021 3 January February whales ollection of Credit Sales IAR 9otal Budgeted Cash Receipts 0 1 2 CHOPPEWA CHOCOLATES Inventory Purchases Budget For the Two Months Ending February 28, 2021 5 January February 7 ost of Goods Sold EB dd 29 wentory Needed CHIPPEWA CHOCOLATES Budgeted income Statement For the Two Months Ending February 28, 2021 January February Sales Revenue Les Gross Profit Less S&A Expenses Income before interest interest expense Net income $1 udgeted Purchases 52 CHIPPEWA CHOCOLATES Balance Sheets Budgets + E 25 ab Custom ab Wrap Text Merge & Center $ % 9 00 H E F G G 2021 -11:00AM CLASS CHIPPEWA CHOCOLATES Selling and Administrative Expenses Budget For the Two Months Ending February 28, 2021 January February Variable costs: Total variable costs Fixed costs: Total fixed costs: Total S & A Expense V AutoSave OFF Revie Home Insert Draw Formulas Data Page Layout Calibri (Body) 11 ' A A B v Paste I U Av . H8 X fx A B D 1 ACC 255 BUDGET PROJECT - SPRING 2 2 Budget information: 3 Projected sales for January, 2021 4 Average Monthly percantage of sales increase: 5 Average monthly salary expense: 6 Average monthly rent expense: 7 Average monthly utility expense: 8 Average monthly misc. expense: 9 Supplies expense as a percentage of sales: 10 Commission expense as a percentage of sales: 11 Cash sales in month of sale 12 Cost of goods sold-percentage of sales 13 Desired ending inventory-percent of next months COGS 14 Payments of inventory in month of purchase 15 Monthly depreciation for 2020 16 New equipment cost 17 Salvage value 18 Useful Life (months) 19 Minimum required cash balance 20 Monthly interest rate 21 11 V Calibri (Body) ' ' V Paste BI UB v H8 X fx B D E 47 COST OTGOOD SONG Less Ince Inte Net Beg Add cas Less 48 Add: 49 Inventory Needed 50 Less: 51 Budgeted Purchases 52 53 54 CHIPPEWA CHOCOLATES 55 Schedule of Cash Payments 56 For the Two Months Ending February 28, 2021 57 58 January February 59 December Purchases 60 61 62 Cash paid for inventory 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 Balancse Sheets Budgets EC Ir Tote Surg Re End + + E G H J CHIPPEWA CHOCOLATES Schedule of Cash Payments for S&A Expenses For the Two Months Ending February 28, 2021 January February Variable costs: Total variable costs Fixed costs: Total fixed costs Cash paid for S&A Expenses CHIPPEWA CHOCOLATES Budgeted Income Statement For the Two Months Ending February 28, 2021 January February Sales Revenue Less: Gross Profit Less: S&A Expenses Income before interest Interest expense Net Income AREA ARAIA H8 Xfx B A D E March 20 Monthly interest rate 21 22 CHIPPEWA CHOCOLATES 23 Sales Budget 24 For the Three Months Ending March 31, 2021 25 26 January February 27 Cash Sales 28 Credit Sales 29 Total Sales 30 31 32 CHIPPEWA CHOCOLATES 33 Schedule of Cash Receipts 34 For the Two Months Ending February 28, 2021 35 36 January February 37 Cash Sales 38 Collection of Credit Sales (A/R) 39 Total Budgeted Cash Receipts 40 41 42 CHIPPEWA CHOCOLATES 43 Inventory Purchases Budget 44 For the Two Months Ending February 28, 2021 45 46 January February 47 Cost of Goods Sold 48 Add: 49 Inventory Needed 50 Less: 51 Budgeted Purchases 52 53 Balancse Sheets Budgets + = Calibri (Body) 11 ' ' BI U BBA Paste F10 > fx 8500 D G 1 2 1 ACC 255 BUDGET PROJECT (521-11:00) Chippewa Chocolates Company Balance Sheet December 31, 2020 4 Assets 5 $ 5 6 7 Cash # Accounts Receivable 9 Inventory 10 Equipment 11 Lass: Acum Depr. 12 11 Total Assets 42,850 55,522 12,934 Liabilities Accounts Payable inventory Salaries Payable Utilities Payable Commissions Payable Notes Payable Total Liabilities 10.415 33,100 5,800 8,500 $ 300,000 27,600 272.400 57,815 $ 383,706 Stockholder's Equity Common Stock Retained Earrings Total Liabilities & Stock Equity 270,000 55,891 383,706 5 Chippewa Chocolates Company Balance Sheet February 28, 2021 Bmww Assets 22 23 24 25 26 27 Cash 28 Accounts Receivable 29 Inventory 30 Cent 31 Less: Accum. Depr 22 33 Total Assets 14 15 36 37 Llabilities Accounts Payable Inventory Salaries payable Utilities Payable Commissions Payable Notes Payable Total abilities Stockholder's Equity Common Stock Retained Earnings Total abilities & Stock. Equity 35 19 40 Variance check 41 43 44 45 45 45 49 E H G F Less: S&A Expenses Income before interest Interest expense Net Income CHIPPEWA CHOCOLATES Cash Budget For the Two months Ending February 28, 2021 January February Beginning Cash Balance Add: Cash Available Less: Cash Paid for: Equipment purchase Interest Total Cash Paid Surplus/(Shortage) Borrowing Repayment Ending Cash Balance Word File Edit Table Window View Insert BS Format Tools E AutoSave Help Project Worksheets-521-1 Analytic Solver Tell me Home Insert Draw Page Layout Formulas Data Review View Calibr (Body) 11 ' Wrap Text Custom Paste B TU BE SA ===== El Meron en $% 18 X D G mum required cash balance Monthly interest rate CHIPPEWA CHOCOLATES Sales Budget For the Three Months Ending March 31, 2021 CHIPPEWA CHOCOLATES Schedule of Cach Payments for SEA Expenses For the Two Months Ending February 28, 2021 January February January February March Variable costs Sales red Sales atal Sales Total variable costs Fixed Totalfred costs Cash paid for S&A Expenses CHIPPEWA CHOCOLATES Schedule of Cash Receipts For the Two Months Ending February 28, 2021 3 January February whales ollection of Credit Sales IAR 9otal Budgeted Cash Receipts 0 1 2 CHOPPEWA CHOCOLATES Inventory Purchases Budget For the Two Months Ending February 28, 2021 5 January February 7 ost of Goods Sold EB dd 29 wentory Needed CHIPPEWA CHOCOLATES Budgeted income Statement For the Two Months Ending February 28, 2021 January February Sales Revenue Les Gross Profit Less S&A Expenses Income before interest interest expense Net income $1 udgeted Purchases 52 CHIPPEWA CHOCOLATES Balance Sheets Budgets + E 25 ab Custom ab Wrap Text Merge & Center $ % 9 00 H E F G G 2021 -11:00AM CLASS CHIPPEWA CHOCOLATES Selling and Administrative Expenses Budget For the Two Months Ending February 28, 2021 January February Variable costs: Total variable costs Fixed costs: Total fixed costs: Total S & A Expense V AutoSave OFF Revie Home Insert Draw Formulas Data Page Layout Calibri (Body) 11 ' A A B v Paste I U Av . H8 X fx A B D 1 ACC 255 BUDGET PROJECT - SPRING 2 2 Budget information: 3 Projected sales for January, 2021 4 Average Monthly percantage of sales increase: 5 Average monthly salary expense: 6 Average monthly rent expense: 7 Average monthly utility expense: 8 Average monthly misc. expense: 9 Supplies expense as a percentage of sales: 10 Commission expense as a percentage of sales: 11 Cash sales in month of sale 12 Cost of goods sold-percentage of sales 13 Desired ending inventory-percent of next months COGS 14 Payments of inventory in month of purchase 15 Monthly depreciation for 2020 16 New equipment cost 17 Salvage value 18 Useful Life (months) 19 Minimum required cash balance 20 Monthly interest rate 21 11 V Calibri (Body) ' ' V Paste BI UB v H8 X fx B D E 47 COST OTGOOD SONG Less Ince Inte Net Beg Add cas Less 48 Add: 49 Inventory Needed 50 Less: 51 Budgeted Purchases 52 53 54 CHIPPEWA CHOCOLATES 55 Schedule of Cash Payments 56 For the Two Months Ending February 28, 2021 57 58 January February 59 December Purchases 60 61 62 Cash paid for inventory 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 Balancse Sheets Budgets EC Ir Tote Surg Re End + + E G H J CHIPPEWA CHOCOLATES Schedule of Cash Payments for S&A Expenses For the Two Months Ending February 28, 2021 January February Variable costs: Total variable costs Fixed costs: Total fixed costs Cash paid for S&A Expenses CHIPPEWA CHOCOLATES Budgeted Income Statement For the Two Months Ending February 28, 2021 January February Sales Revenue Less: Gross Profit Less: S&A Expenses Income before interest Interest expense Net Income AREA ARAIA H8 Xfx B A D E March 20 Monthly interest rate 21 22 CHIPPEWA CHOCOLATES 23 Sales Budget 24 For the Three Months Ending March 31, 2021 25 26 January February 27 Cash Sales 28 Credit Sales 29 Total Sales 30 31 32 CHIPPEWA CHOCOLATES 33 Schedule of Cash Receipts 34 For the Two Months Ending February 28, 2021 35 36 January February 37 Cash Sales 38 Collection of Credit Sales (A/R) 39 Total Budgeted Cash Receipts 40 41 42 CHIPPEWA CHOCOLATES 43 Inventory Purchases Budget 44 For the Two Months Ending February 28, 2021 45 46 January February 47 Cost of Goods Sold 48 Add: 49 Inventory Needed 50 Less: 51 Budgeted Purchases 52 53 Balancse Sheets Budgets + = Calibri (Body) 11 ' ' BI U BBA Paste F10 > fx 8500 D G 1 2 1 ACC 255 BUDGET PROJECT (521-11:00) Chippewa Chocolates Company Balance Sheet December 31, 2020 4 Assets 5 $ 5 6 7 Cash # Accounts Receivable 9 Inventory 10 Equipment 11 Lass: Acum Depr. 12 11 Total Assets 42,850 55,522 12,934 Liabilities Accounts Payable inventory Salaries Payable Utilities Payable Commissions Payable Notes Payable Total Liabilities 10.415 33,100 5,800 8,500 $ 300,000 27,600 272.400 57,815 $ 383,706 Stockholder's Equity Common Stock Retained Earrings Total Liabilities & Stock Equity 270,000 55,891 383,706 5 Chippewa Chocolates Company Balance Sheet February 28, 2021 Bmww Assets 22 23 24 25 26 27 Cash 28 Accounts Receivable 29 Inventory 30 Cent 31 Less: Accum. Depr 22 33 Total Assets 14 15 36 37 Llabilities Accounts Payable Inventory Salaries payable Utilities Payable Commissions Payable Notes Payable Total abilities Stockholder's Equity Common Stock Retained Earnings Total abilities & Stock. Equity 35 19 40 Variance check 41 43 44 45 45 45 49 E H G F Less: S&A Expenses Income before interest Interest expense Net Income CHIPPEWA CHOCOLATES Cash Budget For the Two months Ending February 28, 2021 January February Beginning Cash Balance Add: Cash Available Less: Cash Paid for: Equipment purchase Interest Total Cash Paid Surplus/(Shortage) Borrowing Repayment Ending Cash Balance
