Question

Developing a Master Budget for a Merchandising Organization Dils Brother Department Store prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for 2017. Dils Brother Department Store Balance Sheet March 31, 2017 Assets Liabilities and Stockholders' Equity Cash $ 4,000 Accounts payable $31,000 Accounts receivable 31,000 Dividends payable 15,000 Inventory 36,000 Rent payable 3,000 Prepaid Insurance 3,000 Stockholders' equity 50,000 Fixtures 25,000 Total assets $99,000 Total liabilities and equity $99,000 Actual and forecasted sales for selected months in 2017 are as follows: Month Sales Revenue January $ 70,000 February 60,000 March 50,000 April 60,000 May 70,000 June 80,000 July 100,000 August 90,000 Monthly operating expenses are as follows: Wages and salarles $ 27,000 Depreciation Utilities 1,500 Rent 3,000 100 Cash dividends of $15,000 are declared during the third month of each quarter and are paid during the first month of the following quarter. Operating expenses, except insurance, rent, and depreciation are paid as incurred. Rent is paid during the following month. The prepaid insurance is for five more months. Cost of goods sold is equal to 50 percent of sales. Ending inventories are sufficient for 120 percent of the next month's cost of sales. Purchases during any given month are paid in full during the following month. All sales are on account, with 50 percent collected during the month of sale, 40 percent during the next month, and 10 percent during the month thereafter. Money can be borrowed and repaid in multiples of $1,000 at an interest rate of 12 percent per year. The company desires a minimum cash balance of $4,000 on the first of each month. At the time the principal is repaid, interest is paid on the portion of principal that is repaid. All borrowing is at the beginning of the month, and all repayment is at the end of the month. Money is never repaid at the end of the month it is borrowed.

Answer 1

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Interest working: For this we have to prepare cash budget. Full set is enclosed in image. Below is disbursment schdeule

			Apr	May	Jun	Total
Disbursments:
Cash Payment for:
Merchandise purchase			$                        31,000	$         36,000	$                 41,000	$         108,000
Operating Expense			$                        31,500	$         31,500	$                 31,500	$            94,500
Dividend			$                        15,000			$            15,000
Interest Payment ($1,000*12%*3/12)					$                       300	$                  300
Total Payment	c		$                        77,500	$         67,500	$                 72,800	$         217,800

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. 1. Sales Budget Last year Working Current year May Jun Total Jul Total Sales 60,000 70,000 80,000 210,000 100,000 Sales on Account 100% of Sale $ 60,000 $ 70,000 $ 80,000 $ 210,000 Apr Jun Receivable May 26,000 $ Total $ 31,000 5,000 1a. Cash Receipt Budget Accounts Receivable on Jan 1 Credit Sale from: Apr $ 30,000 $ $ 24,000 $ 35,000 $ May 6,000 $ 28,000 $ 40,000 $ 60,000 63,000 $ 40,000 $ 7,000 40,000 Jun Total Collection from receivable 56,000 $ 64,000 $ 74,000 $ 194,000 $ 47,000 Total Collection 56,000 $ 64,000 $ 74,000 $ 194,000 2. Purchase Budget Apr Jun Jul 50,000 120% Cost of Goods Sold Add: Desired ending inventory Units available Less: Beginning Inventory Budgeted Purchase 30,000 42,000 72,000 -36,000 36,000 May 35,000 48,000 83,000 -42,000 41,000 40,000 60,000 100,000 -48,000 52,000 Total 105,000 60,000 165,000 -36,000 129,000 Budgeted Purchase 36,000 41,000 52,000 129,000 2a. Cash Disbursment Budget Apr May Jun Total Payable 31,000 $ 31,000 Accounts Payable Jan 1 Merchandise purchased in: January February March $ 36,000 $ 41,000 $ $ 36,000 41,000 - $ 52,000 Total Payment for Purchases of Material 31,000 $ 36,000 $ 41,000 $ 108,000 $ 52,000

3. Monthly Operating Expense Budgets Apr May Jun Total Wages and Salaries Utilities Rent 27,000 $ 1,500 $ 3,000 $ 27,000 $ 1,500 $ 3,000 $ 27,000 $ 1,500 $ 3,000 $ 81,000 4,500 9,000 Total Budgeted Selling Expense 31,500 $ 31,500 $ 31,500 $ 94,500 6. Summary Cash Budget Apr May 4,000 $ 56,000 $ Jun 4,500 $ 64,000 $ Total 4,000 $ 4,000 74,000 $ 194,000 Beginning Cash Balance Receipts Disbursments: Cash Payment for: Merchandise purchase Operating Expense Dividend Interest Payment ($1,000*12%*3/12) 31,000 $ 31,500 $ 15,000 36,000 $ 31,500 $ 41,000 $ 31,500 $ $ 300 $ 108,000 94,500 15,000 300 $ Total Payment 77,500 $ 67,500 $ 72,800 $ 217,800 b-c=d a+d Excess receipt over dis Balance before borrowing Borrowing Repayment -21,500 $ -17,500 $ 22,000 $ -3,500 $ 1,000 $ 3,000 $ 1,200 $ 5,200 $ $ -1,000 $ -23,800 - 19,800 25,000 -1,000 Ending Balance 4,500 $ 4,000 $ 4,200 $ 4,200