Question

! 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

a) Sales budget
	October	November	December
Cash Sales	$    126,000.00	$  157,500.00	$    196,875.00
Sales on Account	$    154,000.00	$  192,500.00	$    240,625.00
Total Budgeted Sales	$    280,000.00	$  350,000.00	$    437,500.00
b) Schedule of cash receipts
	October	November	December
Current Cash sales	$    126,000.00	$  157,500.00	$    196,875.00
Add: Collection From A/R	$                   -	$  154,000.00	$    192,500.00
Total Collections	$    126,000.00	$  311,500.00	$    389,375.00
c)  Inventory purchase budget
	October	November	December
Budgeted Cost of goods sold	$    168,000.00	$  210,000.00	$    262,500.00
Add: Desired Ending Inventory	$      21,000.00	$    26,250.00	$      13,600.00
Inventory Needed	$    189,000.00	$  236,250.00	$    276,100.00
Less: Beginning Inventory	$      16,800.00	$    21,000.00	$      26,250.00
Required Purchases on account	$    172,200.00	$  215,250.00	$    249,850.00
d. Schedule of Cash payments budget for Inventory Purchases
	October	November	December
Payment of Current Month's of  accounts payable	$    137,760.00	$  172,200.00	$    199,880.00
Payment of Prior  Month's of  accounts payable		$    34,440.00	$      43,050.00
Total Budgeted payment of Inventory	$    137,760.00	$  206,640.00	$    242,930.00
e. Selling & Administrative Exp budget
	October	November	December
Salary (fixed)	$      19,600.00	$    19,600.00	$      19,600.00
Sales commissions (5% of sales)		$    14,000.00	$      17,500.00
Supplies expense (2% of sales)	$        5,600.00	$      7,000.00	$        8,750.00
Utilities (fixed)	$        3,000.00	$      3,000.00	$        3,000.00
Depreciation	$        5,600.00	$      5,600.00	$        5,600.00
Rent (fixed)	$        6,400.00	$      6,400.00	$        6,400.00
Miscellaneous (fixed)	$        2,800.00	$      2,800.00	$        2,800.00
Total	$      43,000.00	$    58,400.00	$      63,650.00

A B С D October =B24-45% =B24-55% 280000 November =C24*45% =C2455% =B24.1.25 December =D24-45% =D24*55% =C24.1.25 October =B22 0 =B28+B29 November -C22 =B23 =C28+C29 December =D22 =C23 =D28+D29 20 a) Sales budget 21 22 Cash Sales 23 Sales on Account 24 Total Budgeted Sales 25 25 26 b) Schedule of cash receipts 21 27 28 Current Cash sales 29 Add: Collection From A/R 30 Total Collections 31 21 23 32 c) Inventory purchase budget 33 34 Budgeted Cost of goods sold 35 Add: Desired Ending Inventory 36 Inventory Needed 37 Less: Beginning Inventory 38 Required Purchases on account 39 39 40 d. Schedule of Cash payments budget for Inventory Purchases 41 42 Payment of Current Month's of accounts payable 43 Payment of Prior Month's of accounts payable 44 Total Budgeted payment of Inventory 45 46 e. Selling & Administrative Exp budget 47 48 Salary (fixed) 49 Sales commissions (5% of sales) 50 Supplies expense (2% of sales) 51 Utilities (fixed) 52 Depreciation 53 Rent (fixed) 54 Miscellaneous (fixed) 55 Total October =60%"B24 =C34' 10% =B34+B35 =B34'10% =B36-337 November =60% C24 =D34*10% =C34+C35 =B35 =C36-C37 December =60%D24 13600 =D34+D35 =C35 =D36-D37 October =B38*80% November =C38 80% =B38 20% =C42+C43 December =D38*80% =C38*20% =D42+D43 =B42+B43 October 19600 =2%B24 3000 5600 6400 2800 =SUM(B48:B54) November 19600 =B24°5% =2%C24 3000 5600 6400 2800 =SUM(C48:C54) December 19600 =C24°5% =2%D24 3000 5600 6400 2800 =SUM(D48:054)