Question

28 2) Sche ACC 321 Group Project (chapter 6) for a Merchandising ompany 3) 1 Retained Earnings ....*** * June ....... July Nordic Company, a merchandising company, pre- pares its master budgme un quarterly basis. The following data have been assembled to assist in preparation of the master budget for the second quarter. 2. As of March 31 (the end of the prior quarter), the company's balance sheet showed the following account balances: Cash .................... $ 9,000 Accounts Receivable .......... 48,000 Inventory .................. 12,600 Plant and Equipment (net) ...... 214,100 Accounts Payable ........ $ 18,300 Capital Stock ...... 190,000 75,400 $283,700 $283,700 b. Actual sales for March and budgeted sales for April-July are as follows: March (actual) . . . . . . $60,000 April .... 70,000 May ........ 85,000 90,000 50,000 c. Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales. d. The company's gross profit rate is 40% of sales. Monthly expenses are budgeted as follows: salaries and wages, $7,500 per month; ship- ping, 6% of sales; advertising, $6,000 per month; depreciation, $2,000 per month; other expense, 4% of sales. At the end of each month, inventory is to be on hand equal to 30% of the following month's sales needs, stated at cost. Half of a month's inventory purchases are paid for in the month of purchase and half in the following month. Equipment purchases during the quarter will be as follows: April, $11,500; and May, $3,000. Dividends totaling $3,500 will be declared and paid in June. The company must maintain a minimum cash balance of $8,000. An open line of credit is available at a local bank. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month. Borrowings and repayments of principal must be in multiples of $1,000. Interest is paid only at the time of repayment of principal. The annual interest rate is 12%. (Figure interest on whole months, c.g., V1, 712) Using the data above, complete the following statements and schedules for the second quarter: 1) Sales Budget for the 210 Quarter: April May June Total Cash ales ....... $14,000 - Credit sales .. .................. 56,000 Total Budgeted Sales 70.000

Answer 1

Answer to Requirement 1. Cash Sales Credit Sales Total Budgeted Sales Sales Budget April 14,000 56,000 70,000 May 17,000 68,000 85,000 June 18,000 72,000 90,000 Total 49,000 196,000 245,000 Answer to Requirement 2. Cash Sales Credit Sales Total Collections Scheduleof Expected Cash Collections April May 14,000 17,000 48,000 56,000 62,000 73,000 June 18,000 68,000 86,000 Total 49,000 172,000 221,000

Answer to Requirement 3. Budgeted Cost of Goods Sold Add: Desired Ending Inventory Total Needs Deduct: Opening Inventory Required Purchases Inventory Purchases Budget April 42,000 15,300 57,300 12,600 44,700 May 51,000 16,200 67,200 15,300 51,900 June 54,000 9,000 63,000 16,200 46,800 Total 147,000 9,000 156,000 12,600 143,400 *For April Sales = $70,000 Sales * 60% Cost Ratio = $42,000 $51,000 * 30% = $15,300 Desired Ending Inventory, June = $50,000 * 60% * 30% = $9,000 Answer to Requirement 4. June For March purchases For April purchases For May purchases For June purchases Total Cash Disbursements Schedule of Cash Disbursements for Purchases April May 18,300 22,350 22,350 25,950 Total 18,300 44,700 51,900 23,400 138,300 25,950 23,400 49,350 40,650 48,300