Question

A-E have been solved (I included the answers here), so all I need is f-j!

! Required information [The following information applies to the questions displayed below.) Vernon Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, year 1. The company president formed a planning committee to prepare a master budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks. Required a. October sales are estimated to be $280,000, of which 45 percent will be cash and 55 percent will be credit. The company expects sales to increase at the rate of 25 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 60 percent of sales. The company desires to maintain a minimum ending inventory equal to 10 percent of the next month's cost of goods sold. However, ending inventory of December is expected to be $13,600. 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. Salary expense (fixed) Sales commissions Supplies expense Utilities (fixed) Depreciation on store fixtures (fixed)* Rent (fixed) Miscellaneous (fixed) $19,600 5% of Sales 2% of Sales $ 3,000 $ 5,600 $ 6,400 $ 2,800 *The capital expenditures budget indicates that Vernon will spend $237,600 on October 1 for store fixtures, which are expected to have a $36,000 salvage value and a three-year (36-month) useful life.

Answer 1

1. There are some mistakes in your working -

a. There should not be any beginning inventory as the business just started their operation in October. Hence the Purchase for the month of october should be $189,000.

b. Utilities Expense for the October should be Nil in the payment. Only in the income statement we will recognise the expenses but we will not made payment hence the liability for the utilities should be present in the balance sheet.

2. Cash Payment for S&A Expense -

Cash Payment for S&A Expense October November December Selling and Administrative Expense: Salary $ 19,600 $ 19,600 $ 19,600 Sales Commission $ 14,000 $ 17,500 Supplies Expense $ 5,600 $ 7,000 $8,750 Utilities $ $ 3,000 $3,000 Rent $ 6,400 $ 6,400 $ 6,400 Miscellaneous $ 2,800 $ 2,800 $ 2,800 Total Payment $ 34,400 $ 52,800 $ 58,050

3. Cash Budget -

VERNON COMPANY Cash Budget For the Quarter Ended December 31, Year 1 October November December Cash Balance $ $ 28,800 $ 28,240 Cash Receipt: Collection from Customers $ 126,000 $ 311,500 $ 389,375 Total Cash Collection $ 126,000 $340,300 $ 417,615 Less: Cash Disbursement: Inventory Purchase Selling & Admin Expense Store Fixture purchase $ 151,200 $ 210,000 $ 242,930 $ 34,400 $ 52,800 $ 58,050 $ 237,600 Total Cash Disbursement $ 423,200 $ 262,800 $ 300,980 Cash Surplus/ Deficit $(297,200) $ 77,500 $ 116,635 Financing: Borrowing Payment Interest Payment Total $ 326,000 $ (46,000) $ (85,000) $ (3,260) $ (2,800) $ 326,000 $ (49,260) $ (87,800) Cash Balance, Ending $ 28,800 $ 28,240 $ 28,835

4. Income Statement -

VERNON COMPANY Pro Forma Income Statement For the Quarter Ended December 31, Year 1 Budgeted Sale $ 1,067,500 Budgeted Cost of Goods Sold $ 640,500 Gross Profit $ 427,000 Selling and Administrative Expense: Salary Sales Commission Supplies Expense Utilities Depreciation Rent Miscellaneous Interest Expense Total $ 58,800 $ 53,375 $ 21,350 $ 9,000 $ 16,800 $ 19,200 $ 8,400 $ 6,060 $ 192,985 Net Income $ 234,015

5. Balance Sheet -

VERNON COMPANY Pro Forma Balance Sheet December 31, Year 1 Assets: Cash $ 28,835 Accounts Receivable $ 240,625 Inventory $ 13,600 Equipment (Net) $ 220,800 Total Assets $ 503,860 Liabilities: Accounts Payable Sale Commission Payable Utilities Payable Total Current Liabilities $ 49,970 $ 21,875 $ 3,000 $ 74,845 Notes Payable $ 195,000 Total Liabilities $ 269,845 Equity: Owner's Equity Total Owner's Equity $ 234,015 $ 234,015 Total Liabilities and Equity $ 503,860

6. Cash Flow Statement -

VERNON COMPANY Statement of Cash Flows For the Quarter Ended December 31, Year 1 Cash flow from Operating Activities Cash Collected From Customers $ 826,875 Cash Paid to Suppliers $ (604,130) Cash Paid to Expenses $ (145,250) Cash Paid to Interest $ (6,060) Net Cash flow from Operating Activities $ 71,435 Cash flow from Investing Activities Purchase of Store Fixture $ 237,600) Net Cash flow from Investing Activities $ (237,600) Cash flow from Financing Activities Issue of Notes Payable Repayment of Notes Payable $ 326,000 $ (131,000) Net Cash flow from Finacing Activities $ 195,000 Change in Cash $ 28,835 Cash at the Beginning Cash at the End $ $ 28,835