Vernon Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, year 1. 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. 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. b. 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. 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 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. 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 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 should be indicated with a minus sign.) Show less A Cash Budget October November December $ 0 126,000 126.000 311,500 311,500 389,375 389,375 Section 1: Cash Receipts Beginning cash balance Add: Cash receipts Total cash available Section 2: Cash Payments For selling and administrative expenses Purchase of store fixtures For inventory purchases 52,800 58,050 34,400 237,600 151,200 0 0 210,000 242,930 0 0 423,200 0 0 262,800 300,980 Total budgeted disbursements Section 3: Financing Activities (297,200) 48,700 88,395 Ending cash balance $ (297,200) $ 48,700 $ 88,395 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. h. Prepare a pro forma income statement for the quarter. i. Prepare a pro forma balance sheet at the end of the quarter. j. Prepare a pro forma statement of cash flows for the quarter. 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 Required H Required I Required ] 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. November December October Schedule of Cash Payments for S&A Expenses Salary expense $ 19,600 Sales commissions $ 19,600 $ 19,600 3,000 3,000 expense Utilities Depreciation on store fixtures Rent Miscellaneous Total payments for S&A expenses 01 0 6,400 2,800 28,800 $ 6,400 6,400 2,800 2,800 31,800 $ 31,800 $ Prepare a pro forma income statement for the quarter. VERNON COMPANY Pro Forma Income Statement For the Quarter Ended December 31, Year 1 Sales revenue 0 0 $ 0 Prepare a pro forma statement of cash flows for the quarter. (Cash outflows should be indicated with a minus sign.) VERNON COMPANY Pro Forma Statement of Cash Flows For the Quarter Ended December 31, Year 1 Cash flows from operating activities 0 Net cash flows from operating activities Cash flows from investing activities Cash flow from financing activities 0 Vernon Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, year 1. 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. 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. b. 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. 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 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. 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 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 should be indicated with a minus sign.) Show less A Cash Budget October November December $ 0 126,000 126.000 311,500 311,500 389,375 389,375 Section 1: Cash Receipts Beginning cash balance Add: Cash receipts Total cash available Section 2: Cash Payments For selling and administrative expenses Purchase of store fixtures For inventory purchases 52,800 58,050 34,400 237,600 151,200 0 0 210,000 242,930 0 0 423,200 0 0 262,800 300,980 Total budgeted disbursements Section 3: Financing Activities (297,200) 48,700 88,395 Ending cash balance $ (297,200) $ 48,700 $ 88,395 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. h. Prepare a pro forma income statement for the quarter. i. Prepare a pro forma balance sheet at the end of the quarter. j. Prepare a pro forma statement of cash flows for the quarter. 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 Required H Required I Required ] 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. November December October Schedule of Cash Payments for S&A Expenses Salary expense $ 19,600 Sales commissions $ 19,600 $ 19,600 3,000 3,000 expense Utilities Depreciation on store fixtures Rent Miscellaneous Total payments for S&A expenses 01 0 6,400 2,800 28,800 $ 6,400 6,400 2,800 2,800 31,800 $ 31,800 $ Prepare a pro forma income statement for the quarter. VERNON COMPANY Pro Forma Income Statement For the Quarter Ended December 31, Year 1 Sales revenue 0 0 $ 0 Prepare a pro forma statement of cash flows for the quarter. (Cash outflows should be indicated with a minus sign.) VERNON COMPANY Pro Forma Statement of Cash Flows For the Quarter Ended December 31, Year 1 Cash flows from operating activities 0 Net cash flows from operating activities Cash flows from investing activities Cash flow from financing activities 0