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Hammerly Corporation is preparing its m March 31. It sells a single product for $25 a unit. Budgeted sales are 40 credit. All credit sales are collected in the month following the four months follow: y Corporation is preparing its master budget for the quarter ending es are collected in the month following the sales, Budgeted sales for the next 1. Budgeted sales are 40% cash and 60% on Sales in Units ..... January 1,200 February March 1,000 1,600 April 1,400 At December 31, the balance in accounts receivable is $10,000, which represents the uncollected portion of December sales. The company desires merchandise inventory equal to 30% of the next month's sales in units. The December 31 balance of merchandise inventory is 340 units, and inventory cost is $10 per unit. Forty percent of the purchases are paid in the month of purchase and 60% are paid in the following month. At December 31, the balance of Accounts Payable is $8,000, which represents the unpaid portion of December's purchases. Operating expenses are paid in the month incurred and consist of: Sales commissions (10% of sales) Freight (2% of sales) Office salaries ($2,400 per month) Rent ($4,800 per month) Depreciation expense is $4,000 per month. The income tax rate is 40%, and income taxes will be paid on April 1. A minimum cash balance of $10,000 is required, and the cash balance at December 31 is $10,200. Loans are obtained at the end of a month in which a cash shortage occurs. Interest is 1% per month, based on the beginning of the month loan balance, and must be paid each month (The interest payment is rounded to the nearest whole dollar). If the ending cash balance exceeds the minimum, the excess will be applied to repaying any outstanding loan balance. At December 31, the loan balance is $0. Prepare a master budget (round all dollar amounts to the nearest whole dollar) for each of the months of January, February, and March that includes the: Sales budget - Schedule of cash receipts - Merchandise purchases budget Schedule of cash disbursements for merchandise purchases Schedule of cash disbursements for selling and administrative expenses Cash budget, including information on the loan balance

Answer 1

1. Sales Budget
Description	Jan	Feb	Mar
Sales in units	1200	1000	1600
Price p.u	$              25	$              25	$              25
Total Sales	$      30,000	$      25,000	$      40,000
2. Merchandise Purchase Budget
Description	Jan	Feb	Mar
Projected next month sales (in units)	1000	1600	1400
Ending Inventory Percentage	30%	30%	30%
Desired Ending Inventory	300	480	420
Expected sales (in units)	1200	1000	1600
Total units required	1500	1480	2020
Opening Inventory	340	300	480
Total Purchases	1160	1180	1540
Budgeted Cost per unit	$              10	$              10	$              10
Projected Purchases	$      11,600	$      11,800	$      15,400
3. Selling Expense Budget
Description	Jan	Feb	Mar
Budgeted Sales	30000	25000	40000
Variable costs (as percent of sales)	12%	12%	12%
Variable Selling Expenses	3600	3000	4800
Fixed Expenses	7200	7200	7200
Projected Selling Expenses	$      10,800	$      10,200	$      12,000
4. Summary of cash Receipts from Customers
Description	Jan	Feb	Mar
Budgeted Sales	$      30,000	$      25,000	$      40,000
Cash Sale (40%)	$      12,000	$      10,000	$      16,000
Credit Sale (60% to be collected in following month)	$      10,000	$      18,000	$      15,000
Total Cash collection	$      22,000	$      28,000	$      31,000
5. Summary of Cash Disbursements of merchandise purchases
Description	Jan	Feb	Mar
Projected Purchases	$      11,600	$      11,800	$      15,400
Cash Payment (in the month of purchase)	$         4,640	$         4,720	$         6,160
Cash Payment (after 1st month of purchase)	$         8,000	$         6,960	$         7,080
Total Cash disbursed	$      12,640	$      11,680	$      13,240
6. Cash Budget
Particulars	Jan	Feb	Mar
Beginning cash Balance	$      10,200	$      10,000	$      14,868
Budgeted Cash Receipts	$      22,000	$      28,000	$      31,000
Total Cash available	$      32,200	$      38,000	$      45,868
Cash Disbursements
Payments for Selling Expenses(from point 3)	$      10,800	$      10,200	$      12,000
Payments for Merchandise	$      12,640	$      11,680	$      13,240
Payments for interest		$              12
Total Cash Disbursed	$      23,440	$      21,892	$      25,240
cash surplus/deficit	$         8,760	$      16,108	$      20,628
Minimum Cash balance to be kept	$      10,000	$      10,000	$      10,000
Financing
Borrowing	$         1,240
Repayments		$         1,240
Net cash flow from financing
Ending cash Balance	$      10,000	$      14,868	$      20,628