Question

Carter Corporation prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of the master budget for the second quarter of 2019: a. Actual sales for March and budgeted sales for the next four months are as follows: March April May June July $120,000 150,000 160,000 100,000 110,000 b. The company's gross profit rate is 44 percent of sales. c. Monthly expenses are budgeted as follows: salaries and wages, $12,000 per month; advertising, $15.000 per month: utilities, 2 percent of sales, depreciation, $7,500 per month; other expense, 4 percent of sales, and rent, $17,000 per month. d. At the end of each month, inventory is to be on hand equal to 25 percent of the following month's sales needs, stated at cost. e. One half of a month's inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. f. Sales are 20 percent for cash and 80 percent on credit. All credit sale terms are n/30; therefore, accounts are collected the month following sale. The accounts receivable at March 31 are a result of March credit sales. g. As of March 31, 2019 (the end of the prior quarter), the company's general ledger showed the following account balances: Credits Cash Accounts Receivable Inventory Plant and Equip (net) Accounts Payable Capital Stock Retained earnings Debits $24,000 86,000 25,000 99,000 $50,000 125,000 59,000 $234.000 $234.000 h. During May, the company will purchase a new copy machine for $2,000 cash. During June, other equipment will be purchased for cash at a cost of $20.000. Assume there will be no equipment purchases in April 2019. i. During April, the company will declare and pay $14.000 in cash dividends. Assume no dividends will be paid in May or June of 2019. j. The company must maintain a minimum cash balance of $7,500. 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. Borrowings and repayments of principal must be in multiples of $1,000. Interest is paid at the end of each month. The interest rate is 12 percent per annum. (Figure interest on whole months, e.g., 1/12, 2/12.)

Answer 1

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. Last year Working 110,000 20% of Sale 80% of Sale a. Sales Budget Total Sales Cash Sales Sales on Account d. Cash Receipt Budget Accounts Receivable on Apr 1 Credit Sale from: April Current year 150,000 160,000 100,000 $ 30,000 $ 32,000 $ 20,000 $ 120,000 $ 128,000 $ 80,000 Apr May Jun $ 86,000 410,000 $ 82,000 $ 328,000 Total $ 86,000 Receivable $ 120,000 May $ 128,000 $ 120,000 $ 128,000 - June $ 80,000 $ 80,000 Total Collection from receivable Cash Sale Total Collection b. Purchase Budget $ $ $ 86,000 30,000 116,000 $ 120,000 $ 128,000 $ 334,000 $ 32,000 $ 20,000 $ 82,000 $152,000 $ 148,000 $ 416,000 Jul $ 56% of Sale 61,600 25% Budgeted Cost of Goods Sold Add: Desired ending inventory Units available Less: Beginning Inventory Budgeted Purchase e. Cash Disbursment Budget Apr May Jun Total $ 84,000 $ 89,600 $ 56,000 $ 229,600 $ 22,400 $ 14,000 $ 15,400 $ 15,400 $ 106,400 $ 103,600 $ 71,400 $ 245,000 $ 25,000) $ (22,400) $ (14,000) $ (25,000) $ 81,400 $ 81,200 $ 57,400 $ 220,000 May Jun Payable Apr $ 50,000 Total $ 50,000 $ Accounts Payable Apr 1 Merchandise purchased in: April May June Total Payment for Purchases of Material 40,700 $ 40,700 $ 81,400 $ 40,600 $ 40,600 $ 81,200 $ 28,700 $ 28,700 90,700 $ 81,300 $ 69,300 $ 241,300 $ $ 28,700 28,700 $ c. Monthly Selling and admin Expense Budgets Apr May Jun Total 2% of Sale 4% of Sale Utilities Other Expense Salaries and wages Advertising Rent Depreciation $ $ $ $ $ $ 3,000 $ 6,000 $ 12,000 $ 15,000 $ 17,000 $ 7,500 $ 3,200 $ 6,400 $ 12,000 $ 15,000 $ 17,000 $ 7,500 $ 2,000 $ 8,200 4,000 $ 16,400 12,000 $ 36,000 15,000 $ 45,000 17,000 $ 51,000 7,500 $ 22,500 Total Budgeted Selling Expense $ 60,500 $ 61,100 $ 57,500 $ 179,100 f. Summary Cash Budget Beginning Cash Balance Add: Cash Collection Total cash Available Apr $ 24,000 $ 116,000 $ 140,000 May $ 8,040 $152,000 $ 160,040 Jun Total $ 8,030 $ 24,000 $ 148,000 $ 416,000 $ 156,030 $ 440,000 Cash Payment for: Merchandise purchase Selling Expense (Other than Dep) Capital Expenditure Dividend Payament $ $ 90,700 $ 81,300 $ 69,300 $ 241,300 53,000 $ 53,600 $ 50,000 $ 156,600 $ 2,000 $ 20,000 $ 22,000 14,000 $ 14,000 $

Total Payment $ 157,700 $ 136,900 $ 139,300 $ 433,900 $ $ -17,700 $ 7,500 $ 23,140 $ 7,500 $ Preliminary Cash Balance Desired Cash Balance Financing: Borrowing Repayment Interest Payment $ 26,000 $ -15,000 $ -260 $ - 110 $ 16,730 $ 6,100 7,500 $ $ 26,000 -9,000 $ -24,000 -20 $ -390 $ - 7,710 $ 7,710 $ Ending Balance $ 8,040 $ 8,030 $ Part g: Income Statement Sales Revenue Less: Cost of Goods Sold Gross Profit Less: Selling and Admin Expense Selling Expense (Other than Dep) $ 410,000 $ -229,600 $ 180,400 $ 179,100 Total Selling and Admin Expense Operating Income Less: Interest Expense Income before tax $ -179,100 $ 1,300 $ -390 $ 910 Part 7a: Retained Earning-Working Retained Earning, Beginning Balance Add: Net Income Less: Dividend Retained Earning, Ending Balance $ 59,000 $ 910 $ -14,000 $ 45,910 Part 8: Budgeted Balance sheet Cash Accounts receivable Inventory Total Current Assets Plant, property and Equipment, Net $ 7,710 $ 80,000 $ 15,400 $ 103,110 $ 98,500 $99,000+Pur-Dep Total assets $ 201,610 Accounts payable Short Term Loan Total Liabilities $ $ $ 28,700 2,000 30,700 125,000 45,910 Common Stock Retained earnings Total stockholder's Equity Total liabilities and stockholders' equity $ 170,910 $ 201,610 $ -