Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

To prepare a master budget for January, February, and March, use the following information. Page274 a. The company's single product is purchased for $30 per

image text in transcribedimage text in transcribed

To prepare a master budget for January, February, and March, use the following information. Page274 a. The company's single product is purchased for $30 per unit and resold for $55 per unit. The inventory level of 5,000 units on December 31 is more than management's desired level, which is 20% of the next month's budgeted sales units. Budgeted sales are January, 7,000 units; February, 9,000 units; March, 11,000 units; and April, 10,000 units. All sales are on credit. b. Cash receipts from sales are budgeted as follows: January, $221,250; February, $697,000; March, $489,500. c. Cash payments for merchandise purchases are budgeted as follows: January, $80,000; February, $302,800; March, $147,600. d. Sales commissions equal to 20% of sales dollars are paid each month. Sales salaries (excluding commissions) are $5,000 per month. e. General and administrative salaries are $12,000 per month. Maintenance expense equals $2,000 per month and is paid in cash. f. New equipment purchases are budgeted as follows: January, $36,000; February, $96,000; and March, $28,800. Budgeted depreciation expense is January, $6,000; February, $7,000; and March, $7,300. g. The company budgets a land purchase at the end of March at a cost of $150,000, which will be paid with cash on the last day of the month. h. The company has an agreement with its bank to obtain additional loans as needed. The interest rate is 1% per month and interest is paid at each month-end based on the beginning-month balance. Partial or full payments on these loans are made on the last day of the month. The company maintains a minimum ending cash balance of $25,000 at the end of each month. i. The income tax rate for the company is 40%. Income taxes on the first quarter's income will not be paid until April 15 . Required Prepare a master budget for the months of January, February, and March that has the following budgets (round amounts to the nearest dollar). 1. Sales budgets. 2. Merchandise purchases budgets. Check (2) Budgeted purchases: Jan., $114,000; Feb., $282,000 3. Selling expense budgets. 4. General and administrative expense budgets. Hint: Depreciation is included in the general and administrative budget for merchandisers. 5. Capital expenditures budgets. 6. Cash budgets. (6) Ending cash bal.: Jan., $30,100; Feb., $210,300 7. Budgeted income statement for entire quarter (not monthly) ended March 31. 8. Budgeted balance sheet as of March 31 . (8) Budgeted total assets at March 31,$1,568,650

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Operational Guidelines For Postmortem Examinations And Auditing

Authors: O.P. Murty, O.P Murty

1st Edition

8123924437, 978-8123924434

More Books

Students also viewed these Accounting questions

Question

What are the main objectives of Inventory ?

Answered: 1 week ago

Question

Explain the various inventory management techniques in detail.

Answered: 1 week ago

Question

7. What decisions would you make as the city manager?

Answered: 1 week ago

Question

8. How would you explain your decisions to the city council?

Answered: 1 week ago