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Thornton Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2019. 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:

1. October sales are estimated to be $400,000, of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 30 percent per month. Prepare a sales budget.

2. 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.

3. The cost of goods sold is 70 percent of sales. The company desires to maintain a minimum ending inventory equal to 20 percent of the next month’s cost of goods sold. However, ending inventory of December is expected to be $13,500. Assume that all purchases are made on account. Prepare an inventory purchases budget.

4. The company pays 70 percent of accounts payable in the month of purchase and the remaining 30 percent in the following month. Prepare a cash payments budget for inventory purchases.

5. Budgeted selling and administrative expenses per month follow:

Salary expense (fixed)	$	19,500
Sales commissions		4	% of Sales
Supplies expense		2	% of Sales
Utilities (fixed)	$	2,900
Depreciation on store fixtures (fixed)*	$	5,500
Rent (fixed)	$	6,300
Miscellaneous (fixed)	$	2,700

1. *The capital expenditures budget indicates that Thornton will spend $167,000 on October 1 for store fixtures, which are expected to have a $35,000 salvage value and a two-year (24-month) useful life.

Use this information to prepare a selling and administrative expenses budget.

6. Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for selling and administrative expenses.

7. Thornton borrows funds, in increments of $1,000, and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. It pays interest of 2 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $27,000 cash cushion. Prepare a cash budget.

Answer 1

Per HOMEWORKLIB RULES, the first 4 parts only are answerable. Please post the remaining separately. Thank you.

Sales Budget
	October	November	December
Cash sales	160000	208000	270400
Credit sales	240000	312000	405600
Total budgeted sales	400000	520000	676000
Schedule of Cash Receipts
	October	November	December
Cash sales	160000	208000	270400
Collections on account:
October sales		240000
November sales			312000
Total cash receipts	160000	448000	582400
Inventory Purchases Budget
	October	November	December
Cost of goods sold	280000	364000	473200
Add: Desired ending inventory	72800	94640	13500
Inventory needed	352800	458640	486700
Less: Beginning inventory	0	72800	94640
Budgeted purchases required	352800	385840	392060
Cash Payments Budget for Inventory Purchases
	October	November	December
Payment for:
October purchases	246960	105840
November purchases		270088	115752
December purchases			274442
Total cash payments for inventory	246960	375928	390194