Question

If you could please explain and show your work that would be great! Thank you so much!

You have been engaged as a consultant to design a master budget model and then to assist Helping Hand Corp. in making some management decisions based on that master budget. Helping Hand is a small, rapidly growing wholesaler of consumer electronic products. The company's main product lines are small kitchen appliances and power tools. The marketing manager has recently completed a sales forecast. She believes the company's sales will increase by 2 percent each month over the previous month's sales from December 2019 through March 2020. Then sales are expected to remain constant for several months. Helping Hand's projected balance sheet as of December 31, 2019 is as follows: Cash 140,000 Accounts receivable 202,851 Marketable securities 55,000 Inventory 35,894 Buildings and equipment (net of accumulated depreciation) 610,000 Total assets $ 1,043,745 $ 124,488 7,038 5,000 Accounts payable Sales commissions payable Bond interest payable Property taxes payable Bonds payable (3%; due in 2023) Common stock Retained earnings Total liabilities and stockholders' equity 500,000 250,000 157,219 1,043,745 $ The following information has been accumulated to assist with preparing the master budget for the first quarter of 2020: 1) Projected sales for November 2019 are $230,000. Credit sales are typically 85% of total sales. Helping Hand's credit experience indicates that 12% of credit sales are collected during the month of sale, 74% in the month following the sale, and 14% in the second month following the sale. Experience shows the remaining credit sales are uncollectible. 2) Helping Hand's cost of goods sold generally runs at 60% of sales. Inventory is purchased on account and 12% of each month's purchases are paid during the month of purchase. The remainder is paid during the following month. In order to have adequate stocks of inventory on hand, the company attempts to have inventory on hand at the end of each month equal to 25% of the next month's projected cost of goods sold. 3) The controller has estimated that Helping Hand's other monthly expenses will be as follows: Sales salaries 30,000 Advertising and promotion 6,000 Administrative salaries 11,000 Depreciation 8,000 Interest on bonds 1,250 Property taxes 4,000

Answer 1

Sales budget
	Basis	2019		2020			1st quarter
		November	December	Jan	Feb	March	Total
Total Sales	100%	230,000	234,600	239,292	244,078	248,959	732,329
Cash Sales	15%	34,500	35,190	35,894	36,612	37,344	109,849
Credit Sales	85%	195,500	199,410	203,398	207,466	211,615	622,480
Cash Receipt Budget
			2019		2020			1st quarter
		% Collection	November	December	Jan	Feb	March	Total
Cash Sales			34,500	35,190	35,894	36,612	37,344	109,849
Cash Collections from credit sale made during the current month		12%	23,460	23,929	24,408	24,896	25,394	74,698
Cash Collections from credit sale made during preceding Month		74%	-	144,670	147,563	150,515	153,525	156,595
Cash Collections from credit sale made during 2nd preceding Month		14%			27,370	27,917	28,476	29,045
Total Cash Receipts			57,960	203,789	235,235	239,940	244,738	370,188
Purchases Budget		2019	2020
		December	Jan	Feb	March	1st Quarter
Budgeted Cost of Goods Sold		140,760	143,575	146,447	149,376	439,398
Add: Desired Ending Inventory		35,894	36,612	37,344	109,849	183,805
Total Goods Needed		176,654	180,187	183,791	259,225	623,203
Less: Beginning Inventory		35,190	35,894	36,612	37,344	109,849
Purchases		141,464	144,293	147,179	221,881	513,353
Cash Disbursement Budget
		2020
		Jan	Feb	March	1st Quarter
Inventory purchases		143,575	146,447	149,376	439,398
Cash payments for purchases during current month		17,229	17,574	17,925	52,728
Cash payments for purchases during the preceding month		126,346	128,873	131,451	386,670
Total Cash payment For Inventory Purchases		143,575	146,447	149,376	439,398
Other Expenses
Sales Salaries		30,000	30,000	30,000	90,000
Advertising & promotion		6,000	6,000	6,000	18,000
Administrative Salaries		11,000	11,000	11,000	33,000
Interest on Bonds			7,500		7,500
Property Taxes		-	-	12,000	12,000
Sales Commissions		7,038	7,179	7,322	21,539
Dividend Paid				100,000
total Cash payment For Other Expenses		54,038	61,679	166,322	182,039
Total Cash Disbursements		197,613	208,125	315,698	621,437