Sweet Company, a specialty chocolate store, prepares a master budget on a quarterly basis. The company has assembled the following data to assist in preparing its master budget for the first quarter:
a. As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances:
Debits |
Credits |
|
Cash |
$ 50,000 |
|
Accounts Receivable |
162,500 |
|
Inventory |
58,000 |
|
Buildings and Equipment (net) |
370,000 |
|
Accounts Payable |
$ 65,000 |
|
Capital Stock |
412,500 |
|
Retained Earnings |
163,000 |
|
$640,500 |
$640,500 |
b. Actual sales for November and December, along with budgeted sales for the next four months, are as follows:
November (actual) |
$250,000 |
December (actual) |
$300,000 |
January |
$300,000 |
February |
$650,000 |
March |
$350,000 |
April |
$200,000 |
c. Sales are 50% for cash sales and 50% for credit sales. Credit sales are collected in the two months following the sale: 90% the month after the sale, 10% two months after the sale. The accounts receivable at December 31 are a result of November and December credit sales.
d. The company’s gross margin is 45% of sales. (In other words, cost of goods sold is 55% of sales.)
e. Monthly salary and wage expenses are budgeted as follows: salaries and wages, $27,000 per month for the first two months, $26,000 in March as Sweet cuts the hours of its sales force to reflect declining sales.
f. Other monthly expenses are as follows: advertising $80,000 per month; shipping cost is 5% of total monthly sales revenues, and other expenses are 3% of sales revenues. Depreciation, including depreciation on new assets acquired during the quarter, will be $40,000 for the quarter.
g. Each month’s ending inventory should equal 10% of the following month’s cost of goods sold.
h. One-half of a month’s inventory purchases are paid for in the month of purchase; the other half is paid in the following month.
i. During January, the company will purchase a new copy machine for $2,000 cash. During March, other equipment will be purchased for cash at a cost of $79,500.
j. During January, the company will declare and pay $38,000 in cash dividends.
k. The company must maintain a minimum cash balance of $40,000. An open line of credit is available at a local bank for any borrowing that may be needed during the quarter. 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 payment of principal. The annual interest rate is 6%. (Figure interest on whole months, e.g., 2/12, 3/12.)
l. The company does not pay any income taxes.
Required:
Using the data above, complete the following statements and schedules for the first quarter:
4. Schedule of expected cash disbursements for selling and administrative expenses:
January |
February |
March |
Quarter |
|
Salaries and wages |
$27,000 |
|||
Advertising |
80,000 |
|||
Shipping |
15,000 |
|||
Other expenses |
9,000 |
|||
Total cash disbursements for selling and administrative expenses |
$131,000 |
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Sweet Company, a specialty chocolate store, prepares a master budget on a quarterly basis. The company...
Sweet Company, a specialty chocolate store, prepares a master budget on a quarterly basis. The company has assembled the following data to assist in preparing its master budget for the first quarter: a. As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances: Debits Credits Cash $ 50,000 Accounts Receivable 162,500 Inventory 58,000 Buildings and Equipment (net) 370,000 Accounts Payable $ 65,000 Capital Stock 412,500 Retained Earnings 163,000 $640,500...
Sweet Company, a specialty chocolate store, prepares a master budget on a quarterly basis. The company has assembled the following data to assist in preparing its master budget for the first quarter: a. As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances: Debits Credits Cash $ 50,000 Accounts Receivable 162,500 Inventory 58,000 Buildings and Equipment (net) 370,000 Accounts Payable $ 65,000 Capital Stock 412,500 Retained Earnings 163,000 $640,500...
ACC 311 Master Budget Problem Sweet Company, a specialty chocolate store, prepares a master budget on a quarterly basis. The company has assembled the following data to assist in preparing its master budget for the first quarter: a. As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances: Debits Credits Cash $ 50,000 Accounts Receivable 162,500 Inventory 58,000 Buildings and Equipment (net) 370,000 Accounts Payable $ 65,000 Capital Stock...
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Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of the master budget for the first quarter: a. As of December 31 (the end of the prior quarter), the company's general ledger showed the following account balances: Credits Cash Accounts receivable Inventory Buildings and equipment (net) Accounts payable Capital shares Retained earnings Debits $ 49,000 224,000 60,000 376,000 $ 93,000 510,000 106,000 $709,000 $709,000...