Question
The information given below is Bobcats Companys beginning balance sheet, estimates and policies, and the partially completed Master Budget for January and February. Use the
The information given below is Bobcats Companys beginning balance sheet, estimates and policies, and the partially completed Master Budget for January and February. Use the information to answer the 22 Multiple Choice Questions, each asking for a missing number from the Master Budget. Round all your computations to the nearest dollar.
- Sales are expected to be $80,900 in January, $100,900 in February, and $105,900 in March.
- All sales are on credit and it collects 20% of all sales in the month of the sale, the remaining 80% in the month after the sale.
- The cost of goods sold is equal to 40% of sales.
- The company likes to keep an ending inventory on hand equal to 15% of next months cost of goods sold.
- All purchases of inventory are on account, and the company pays for 60% of all purchases in the month of the purchase, 40% in the month after the purchase.
- The company pays its sales force a commission equal to 3% of sales.
- The company also believes that its miscellaneous expense is equal to $500 plus 2% of sales.
- Rent is $2,000 per month, Supplies are $600 per month, and Depreciation is $1,800 per month.
- On January 1st, the company purchased an insurance policy covering 24 months for $28,800.
- All selling and administrative expenses are paid in the month they are incurred except for commissions that are paid in the month after they are earned and the insurance which is paid two year in advance.
- The company purchased $4,000 of Land on February 18th. They paid cash for the land.
- Interest on long-term debt is equal to 1% of the beginning balance and is paid each month. The company must maintain a minimum balance in cash of $15,000 and will use any cash surplus to pay down long-term debt. The company borrows cash in $1,000 increments.
- The company is subject to a 30% income tax rate. The company pays income taxes in the month after they are accrued (expensed).
- The companys Board of Directors declared a cash dividend of $950 on January 4th. The dividend will be paid on February 10th.
- The company had a beginning balance sheet (as of January 1) as follows:
Assets | Liabilities & SE | ||
Current Assets | Current Liabilities | ||
Cash | $16,000 | Accounts Payable | $23,500 |
Accounts Receivable | 48,000 | Commissions Payable | 3,400 |
Prepaid Insurance | 0 | Income Taxes Payable | 9,275 |
Inventory | 9,600 | Dividends Payable | 0 |
Total Current Assets | 73,600 | Total Current Liabilities | 36,175 |
Long-term Debt | 80,000 | ||
Property, Plant & Equipment | |||
Equipment | 95,000 | Stockholders Equity | |
Land | 8,800 | Common Stock | 26,225 |
Accumulated Depreciation | (25,000) | Return Earnings | 10,000 |
Net PPE | 78,800 | Total SE | 36,225 |
Total Assets | $152,400 | Total Liabilities & SE | $152,400 |
Babcats Company's partically completed master budget is as follows:
Sales Budget
January | February | March | |
Credit Sales | $80,900 | $100,900 | $105,900 |
Cash Receipts from Customers | |||
From Current Month Credit Sales | |||
From Prior Month Credit Sales | |||
Total Cash Receipts from Customers | (1) |
Inventory Purchases Budget
January | February | March | |
COGS | $40,360 | $42,360 | |
Desired Ending Inventory | |||
Total INventory Needed | |||
Beginning Inventory | |||
Inventory Purchases | (2) | ||
Cash Payments for Inventory Purchases | |||
For Current Month Purchases | |||
For Prior Month Purchases | |||
Total Cash Payments for Inventory Purchases | $40,788 | (3) |
Selling & Administrative Expenses Budget
January | February | |
Variable Selling & Administrative Expenses | ||
Commissions | (4) | |
Miscellaneous | ||
Total Variable S&A Expenses | 4,045 | 5,045 |
Fixed Selling & Administrative Expenses | ||
Miscellaneous | ||
Rent | 2,000 | 2,000 |
Supplies | ||
Depreciation | 1,800 | 1,800 |
Insurance | (5) | |
Total Fixed S&A Expenses | $6,100 | $6,100 |
Cash Payments for S&A Expenses | ||
Commissions | ||
Utilities | ||
Advertising | ||
Salaries | ||
Depreciation | (6) | |
Insurance | (7) | |
Total Cash Payments for S&A Expenses | $36,918 | $7,545 |
Cash Budget
January | February | |
Beginning Cash Balance | ||
Cash Receipts from Customers | ||
Total Cash Available | 80,180 | |
Cash Payments | ||
For Inventory Purchases | 40,788 | |
For S&A Expenses | ||
For Interest | (8) | |
For Income Taxes | ||
For Land Purchase | ||
For Dividends | ||
Total Cash Payments | 87,781 | |
Surplus (Deficit) | (9) | 39,574 |
Borrowing (Repayment) | (10) | |
Ending Cash Balance | $ 15,000 |
Income Statement
January | February | |
Sales | $80,900 | $100,900 |
Less: Variable Expenses | ||
COGS | ||
Variable S&A Expenses | ||
Contrinbution Margin | (11) | |
Less: Fixed Expenses | ||
Fixed S&A Expenses | ||
Interest Expense | ||
Pre-tax Net Income | ||
Income Taxes Expense | 11,279 | 14,510 |
After-tax Net Income | $26,317 | $33,856 |
Balance Sheet
Assets | Liabilities & SE | ||||
Current Assets | Current Liabilities | ||||
Cash | (12) | Accounts Payable | (18) | ||
Accounts Receivable | (13) | Commissions Payable | (19) | ||
Prepaid Insurance | (14) | Income Taxes Payable | |||
Inventory | (15) | Dividends Payable | (20) | ||
Total Current Assets | Total Current Liabilities | ||||
Long-term Debt | (21) | ||||
Property, Plant & Equipment | |||||
Equipment | 95,000 | 95,000 | Stockholders Equity | ||
Land | (16) | Common Stock | 26,225 | 26,225 | |
Accumulated Depreciation | (17) | Return Earnings | (22) | ||
Net PPE | Total SE | ||||
Total Assets | $190,773 | $207,674 | Total Liabilities & SE | $190,773 | $207,674 |
(9) What is Total Cash Surplus (Deficit) for January?
multiple choice 9
-
$39,574
-
$-7,601
-
$7,601
-
$-11,601
(10) What is Total Net Borrowing (Repayment) for February?
multiple choice 10
-
$-39,574
-
$24,574
-
$23,000
-
$-24,574
(11) What is the Contribution Margin for February?
multiple choice 11
-
$44,495
-
$100,900
-
$33,856
-
$55,495
(12) What is the balance of Cash on February 28?
multiple choice 12
-
$15,000
-
$16,000
-
$0
-
$15,399
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