Question

Required information Problem 14-23 Preparing a master budget for retail company with no beginning account balances LO 14-2, 14-3, 14-4, 14-5, 14-6 (The following information applies to the questions displayed below.) Baird Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2019. The company president formed a planning committee to prepare a meter budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks: Problem 14-23 Part 1 Required a. October sales are estimated to be $300,000, of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 20 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 70 percent of sales. The company desires to maintain a minimum ending inventory equal to 20 percent of the next month's cost of goods sold. However, ending inventory of December is expected to be $12,100. 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: Prev 1 of 1 !! Next >

Answer 1

Baird Company Sales Budget Req A Calculation Oct Nov Dec Quarter Oct Nov Dec 300,000*40% Cash sales 120,000 144,000 172,800 - 360,000*40% 436,800 =432,000*40% 216,000 259,200 432,000*60 % Sales on account 300,000*60% 360,000*60% 180,000 655,200 Total budgeted sales 300,000 300,000*(1+20%) =360,000*(1+20%) 360,000 432,000 1,092,000 Schedule of cash receipts Req B Oct Nov Dec Quarter Oct Nov Dec Cash sales 120,000 144,000 172,800 436,800 Collections from AR 180,000 216,000 396,000 Total collections 120,000 832,800 324,000 388,800 Inventory Purchase budget Req C Oct Nov Dec Quarter Oct Nov Dec Budgeted Cost of goods sold Add Desired Ending Inventory Inventory Needed -432,000*70% 210,000 764,400 -360,000*70% 252,000 302,400 -300,000*70% -252,000*20% 302,400*20% 50,400 60,480 12,100 12,100 260,400 776,500 312,480 314,500 End Inv of Oct Less Beginning Inventory End Inv of Nov 50,400 60,480 Required Purchases (on account) 260,400 262,080 254,020 776,500 Schedule of cash payments budget for Inv Purchases Req D Oct Nov Dec Quarter Oct Nov Dec Payment of current months AP -260,400*80% -262,080*80% -254,020*80% 208,320 209,664 203,216 621,200 Payment of prior months AP -260,400*20% 262,080*20% 52,080 52,416 104,496 Total budgeted payments for inventory 208,320 261,744 255,632 725,696 Selling& Admin Expenses Budget Req E Salary expense Oct Nov Dec Quarter Oct Nov Dec 18,100 18,100 18,100 54,300 Sales commission 43,680 360,000 4% 432,000*4% 12,000 14,400 17,280 300,000*4% 432,000*2 % Supplies expense 360,000*2% 7,200 21,840 300,000*2% 6,000 8,640 1,500 Utilities 4,500 1,500 1,500 Depreciation on store fixtures 4,100 4,100 4,100 12,300 4,900 4,900 14,700 Rent 4,900 Miscellaneous 1,300 1,300 1,300 3,900 Total S&A expenses 155,220 47,900 51,500 55,820 Schedule of cash payments for S&A Expenses Req F Salary expense Quarter Oct Nov Dec Oct Nov Dec 18,100 18,100 18,100 54,300 Sales commission 12,000 14,400 26,400 6,000 Supplies expense 7,200 8,640 21,840 Utilities 1,500 1,500 3,000 Depreciation on store fixtures 4,900 Rent 4,900 4,900 14,700 Miscellaneous 1,300 1,300 1,300 3,900 Total Payments for S&A expenses 30,300 45,000 48,840 124,140 Cash budget Req G Oct Nov Dec Quarter Oct Nov Dec Cash balance, beginning 13,980 13,000 324,000 388,800 Add Cash collections 120,000 120,000 832,800 832,800 Total cash available 337,980401,800 Less Payments For Inventory purchases 208,320 261,744 255,632 725,696 For S&A expenses 124,140 30,300 45,000 48,840 Purchase of store fixtures 119,400 119,400 - 252,000*2% Interest expense (252,000-13,196)*2% 5,040 4,776 9,816 358,020 979,052 Total budgeted payments Payments minus receipts Financing 311,784 309,248 (238,020) (146,252) 26,196 92,552 Borrowings (Repayments) Cash balance, ending (13,196) (79,552) 159,252239,000+13,000 252,000 -26,196+13,000 -92,552+13,000 Rounded off deficit of 238,020 to 239,000 for borrowings calculo 13,000 13,000 13,980 13,000