Watson Products is a merchandising company that sells baby lotion in New York The company is about to prepare its budgets for the first quarter of the year 20x2 The following information has been assembled to assist in preparing the companys budgets of the quarter a Account balances from the post closing trial balance on December 31, 20x1 follows Debit Credit Cash $ 42,000 Account receivable 369,000 Inventory (8,100 bottles) 145,800 Land 150,000 Building 200,000 Accumulated depreciation Building $ 20,000 Accounts Payable (from inventory purchased) 113,760 Capital Stock 705,000 Retained Earnings 68,040 $906,800 $906,800 b Actual sales and budgeted sales are as follows (selling price per bottle $30) Actual Sales Budgeted Sales 20x1 November $360,000 20x2 January $540,000 December $420,000 February $600,000 March $750,000 April $840,000 Sales are 25 for cash and 75 on credit Eighty percent (80 ) of a months credit sales are collected in the first month after sales, and the remainder 20 are collected in the second month after sales c The Company maintains its ending inventory at 45 of the following months cost of goods sold d The purchase cost per bottle of lotion for the quarter is the same as the inventory on December 31, 20x1 Inventory purchases are paid 60 in the month of purchase, and the remaining balance are paid in the following month Inventory purchases of the quarter 20x2 January $ February $ March $ e Monthly operating expenses are budgeted and paid when incurred as follows Sales commission 5 of sales Delivery expense 2 of sales Salaries expense $15,000 Advertising expense $ 4,000 Depreciation expense $ 2,000 Other expenses 3 of sales f Land will be purchased for cash 20x2 January $ 100,000 February $ 80,000 g The company must maintain a minimum cash balance of $40,000 All borrowings are done at the beginning of a month, and all repayments are made at the end of a month Borrowings and repayments of principal must be in multiples of $1,000 Interest is paid only when principal is repaid The interest rate is 12 per annum Example of an answer 6000 1 Total gross profit of the quarter Answer 2 Total operating expenses in the income statement of the first quarter Answer 3 Total cash disbursements for operating expenses of the quarter Answer 4 Total Inventory purchases for the quarter Answer 5 Total cash disbursement for inventory purchases in the first quarter Answer 6 Total cash collected from sales in the quarter Answer 7 Total cash disbursements of the quarter Answer 8 The amount of cash the company will borrow in January Answer 9 Total cash repayment will be made in February Answer 10 Interest expense in the income statement of the quarter Answer

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Watson Products is a merchandising company that sells baby lotion in New York. The company is about to prepare its budgets for the first quarter

Watson Products is a merchandising company that sells baby lotion in New York. The company is about to prepare its budgets for the first quarter of the year 20x2. The following information has been assembled to assist in preparing the companys budgets of the quarter.

a. Account balances from the post-closing trial balance on December 31, 20x1 follows :

	Debit	Credit
Cash	$ 42,000
Account receivable.	369,000
Inventory (8,100 bottles) ...	145,800
Land.	150,000
Building	200,000
Accumulated depreciation Building .........		$ 20,000
Accounts Payable (from inventory purchased)		113,760
Capital Stock.		705,000
Retained Earnings.	________	68,040
	$906,800	$906,800

b. Actual sales and budgeted sales are as follows (selling price per bottle $30) :

Actual Sales			Budgeted Sales
20x1	November	$360,000	20x2	January	$540,000
	December	$420,000		February	$600,000
				March	$750,000
				April	$840,000

Sales are 25% for cash and 75% on credit. Eighty percent (80%) of a months credit sales are collected in the first month after sales, and the remainder 20% are collected in the second month after sales.

c. The Company maintains its ending inventory at 45% of the following months cost of goods sold.

d. The purchase cost per bottle of lotion for the quarter is the same as the inventory on December 31, 20x1. Inventory purchases are paid 60% in the month of purchase, and the remaining balance are paid in the following month.

Inventory purchases of the quarter
20x2	January	$ ?
	February	$ ?
	March	$ ?

e. Monthly operating expenses are budgeted and paid when incurred as follows :

Sales commission. 5% of sales

Delivery expense. 2% of sales

Salaries expense $15,000

Advertising expense. $ 4,000

Depreciation expense $ 2,000

Other expenses. 3% of sales

f. Land will be purchased for cash :

20x2: January $ 100,000

February $ 80,000

g. The company must maintain a minimum cash balance of $40,000. All borrowings are done at the beginning of a month, and all repayments are made at the end of a month. Borrowings and repayments of principal must be in multiples of $1,000. Interest is paid only when principal is repaid. The interest rate is 12% per annum.

Example of an answer

6000

Total gross profit of the quarter

Answer

Total operating expenses in the income statement of the first quarter

Answer

Total cash disbursements for operating expenses of the quarter

Answer

Total Inventory purchases for the quarter

Answer

Total cash disbursement for inventory purchases in the first quarter

Answer