Zoom in to unblur

You are the new manager of the local Tronic Electronics store. Top management of Tronic Electronics is convinced that management training should include the active participation of store managers in the budgeting process. You have been asked to prepare a complete master budget for your store for June, July, and August. All accounting is done centrally so you have no expert help on the premises. In addition, tomorrow the branch manager and the assistant controller will be here to examine your work; at that time, they will assist you in formulating the final budget document. The idea is to have you prepare the initial budget on your own so that you gain more confidence about accounting matters. You want to make favorable impression on your superiors, so you gather the following financial statement and sales data as of May 31, 20x8 (Click the icon to view the data.) (Click the icon to view the additional information.) Read the requirements Requirement 1. Prepare a budgeted income statement for the coming June through August quarter, a cash budget for each of the next three months, and a budgeted balance sheet for August 31, 20X8. All operations are evaluated on a before-income-tax basis, so income taxes may be ignored here. Before we prepared the budgeted income statements, cash budgets, and budgeted balance sheet, let's prepare a sales budget, a schedule of cash collections from customers, a purchases budget, a schedule of cash disbursements for purchases, and a schedule of operating expenses and disbursements for expenses (except interest.) Begin by preparing the sales budget for the June through August quarter. Schedule a: Sales budget June - X More Info July August Credit sales Cash sales Total sales Data Table Cash $ Credit sales are 80% of total sales. Sixty percent of each credit account is collected in the month following the sale and the remaining 40% is collected in the subsequent month. Assume that bad debts are negligible and can be ignored. The accounts receivable on May 31 are the result of the credit sales for April and May (0.40 x 0.80 x $160,000) + (1.0 x 0.80 x $170,000) = $187,200 The policy is to acquire enough inventory each month to equal the following month's projected cost of goods sold. All purchases are paid for in the month following purchase. The average gross profit on sales is 31%. Salaries, wages, and commissions aver 24% of sales; all other variable expenses are 1% of sales. Fixed expenses for rent, property taxes, and miscellaneous payroll and other items are $9,000 monthly. Assume that these variable and fixed expenses require cash disbursements each month. Depreciation is $600 monthly In June, $7,000 is going to be disbursed for fixtures acquired and recorded in furniture and fixtures in May. The May 31 balance of accounts payable includes this amount. Assume that a minimum cash balance of $10,000 is to be maintained. Also assume that all borrowings are effective at the beginning of the month and all repayments are made at the end of the month of repayment. Interest is compounded and added to the outstanding balance each month, but interest is paid only at the ends of months when principal is repaid. The interest rate is 8% per annum; round interest computations and interest payments to the nearest dollar. Interest payments may be any dollar amount, but all borrowing and repayments of principal are made in multiples of $1,000 Inventory Accounts receivable 17.700 Recent and Projected Sales 193,200 April 160,000 187,200 May 170,000 38,000 June 280,000 436,100 July 210,000 200,200 August 210,000 160,000 Net furniture and fixtures $ Total assets Accounts payable $ 235,900 September Owners' equity Total liabilities 436,100 and owners' equities Print Done You are the new manager of the local Tronic Electronics store. Top management of Tronic Electronics is convinced that management training should include the active participation of store managers in the budgeting process. You have been asked to prepare a complete master budget for your store for June, July, and August. All accounting is done centrally so you have no expert help on the premises. In addition, tomorrow the branch manager and the assistant controller will be here to examine your work; at that time, they will assist you in formulating the final budget document. The idea is to have you prepare the initial budget on your own so that you gain more confidence about accounting matters. You want to make favorable impression on your superiors, so you gather the following financial statement and sales data as of May 31, 20x8 (Click the icon to view the data.) (Click the icon to view the additional information.) Read the requirements Requirement 1. Prepare a budgeted income statement for the coming June through August quarter, a cash budget for each of the next three months, and a budgeted balance sheet for August 31, 20X8. All operations are evaluated on a before-income-tax basis, so income taxes may be ignored here. Before we prepared the budgeted income statements, cash budgets, and budgeted balance sheet, let's prepare a sales budget, a schedule of cash collections from customers, a purchases budget, a schedule of cash disbursements for purchases, and a schedule of operating expenses and disbursements for expenses (except interest.) Begin by preparing the sales budget for the June through August quarter. Schedule a: Sales budget June - X More Info July August Credit sales Cash sales Total sales Data Table Cash $ Credit sales are 80% of total sales. Sixty percent of each credit account is collected in the month following the sale and the remaining 40% is collected in the subsequent month. Assume that bad debts are negligible and can be ignored. The accounts receivable on May 31 are the result of the credit sales for April and May (0.40 x 0.80 x $160,000) + (1.0 x 0.80 x $170,000) = $187,200 The policy is to acquire enough inventory each month to equal the following month's projected cost of goods sold. All purchases are paid for in the month following purchase. The average gross profit on sales is 31%. Salaries, wages, and commissions aver 24% of sales; all other variable expenses are 1% of sales. Fixed expenses for rent, property taxes, and miscellaneous payroll and other items are $9,000 monthly. Assume that these variable and fixed expenses require cash disbursements each month. Depreciation is $600 monthly In June, $7,000 is going to be disbursed for fixtures acquired and recorded in furniture and fixtures in May. The May 31 balance of accounts payable includes this amount. Assume that a minimum cash balance of $10,000 is to be maintained. Also assume that all borrowings are effective at the beginning of the month and all repayments are made at the end of the month of repayment. Interest is compounded and added to the outstanding balance each month, but interest is paid only at the ends of months when principal is repaid. The interest rate is 8% per annum; round interest computations and interest payments to the nearest dollar. Interest payments may be any dollar amount, but all borrowing and repayments of principal are made in multiples of $1,000 Inventory Accounts receivable 17.700 Recent and Projected Sales 193,200 April 160,000 187,200 May 170,000 38,000 June 280,000 436,100 July 210,000 200,200 August 210,000 160,000 Net furniture and fixtures $ Total assets Accounts payable $ 235,900 September Owners' equity Total liabilities 436,100 and owners' equities Print Done