Question

Required information The following information applies to the questions displayed below. Rundle 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: Required a. October sales are estimated to be $350,000, of which 35 percent will be cash and 65 percent will be credit. The company expects sales to increase at the rate of 20 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 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 $13,100 Assume that all purchases are made on account. Prepare an inventory purchases budget d. The company pays 60 percent of accounts payable in the month of purchase ond the remaining 40 percent in the following month Prepare a cash payments budget for inventory purchases e. Budgeted selling and administrative expenses per month follow Salary expenae (ixed) Sales conmissions Supplies expense Utilities (fixed) Depreciation on store fixtures (fixed) Rent (fixed) Miscellaneous (fixed) 19,100 4 of Sales 2 of Sales S 2,500 S 5,100 s 5,900 S2,300 The capital expenditures budget indicates that Rundle will spend $153,400 on October 1 for store fixtures, which are expected to have a $31,000 salvage value and a two-year (24-month) useful life Use this information to prepare a selling and administrative expenses budget

Answer 1

A.

Sales Budget
	October	November	December
Sales Budget	$     350,000.00	$      420,000.00	$    504,000.00
Cash Sales	$     122,500.00	$      147,000.00	$    176,400.00
Sales on Account	$     227,500.00	$      273,000.00	$    327,600.00

B.

Schedule of Cash Receipts
	October	November	December
Schedule of Cash Receipts
Current cash sales	$     122,500.00	$      147,000.00	$    176,400.00
Plus collection from A/R		$      227,500.00	$    273,000.00
Total Collections	$     122,500.00	$      374,500.00	$    449,400.00

C.

Inventory Purchase budget
	October	November	December
Inventory purchase budget
Cost of goods sold	$     245,000.00	$      294,000.00	$    352,800.00
Add: Desired ending inventory	$        58,800.00	$         70,560.00	13100
Inventory Needed	$     303,800.00	$      364,560.00	$    365,900.00
Less: Beginning Inventory		$         58,800.00	$      70,560.00
Required purchases (on account)	$     303,800.00	$      305,760.00	$    295,340.00

D.

Schedule of cash payments budget for inventory purchases
	October	November	December
Payments of current months accounts payable	$     182,280.00	$      183,456.00	$    177,204.00
Payment for prior months account payable		$      121,520.00	$    122,304.00
Total budgeted payment for inventory	$     182,280.00	$      304,976.00	$    299,508.00

E.

Selling and Administrative expenses budget
	October	November	December
Salary Expense	$        19,100.00	$         19,100.00	$      19,100.00
Sales Commission	$        14,000.00	$         16,800.00	$      20,160.00
Supplies Expense	$          7,000.00	$           8,400.00	$      10,080.00
Utilities	$          2,500.00	$           2,500.00	$         2,500.00
Depreciation on store fixtures	$          5,100.00	$           5,100.00	$         5,100.00
Rent	$          5,900.00	$           5,900.00	$         5,900.00
Miscellaneous	$          2,300.00	$           2,300.00	$         2,300.00
Total S&A expenses	$       55,900.00	$        60,100.00	$      65,140.00

F.

Schedule of cash payments for S&A expenses
	October	November	December
Salary Expense	$        19,100.00	$         19,100.00	$      19,100.00
Sales Commission		$         14,000.00	$      16,800.00
Supplies Expense	$          7,000.00	$           8,400.00	$      10,080.00
Utilities		$           2,500.00	$         2,500.00
Rent	$          5,900.00	$           5,900.00	$         5,900.00
Miscellaneous	$          2,300.00	$           2,300.00	$         2,300.00
Total S&A expenses	$       34,300.00	$        52,200.00	$      56,680.00

G.

Cash Budget
	October	November	December
Opening Balance	$                      -	$        23,520.00	$      23,000.00
Cash Collection	$     122,500.00	$      374,500.00	$    449,400.00
Cash available	$     122,500.00	$      398,020.00	$    472,400.00
Less: Payments
Inventory purchases	$     182,280.00	$      304,976.00	$    299,508.00
S&A expenses	$        34,300.00	$         52,200.00	$      56,680.00
Capital Expenditure
Stores and fixtures	$     153,400.00
Interest		$           5,420.00	$         5,171.52
Total budgeted payments	$     369,980.00	$      362,596.00	$    361,359.52
Payments minus receipts
Excess /(Deficiency)	$   (247,480.00)	$        35,424.00	$    111,040.48
Financing Activity
Borrowings / (Repayments)	$     271,000.00	$       (12,424.00)	$     (88,040.48)
Ending Balance	$       23,520.00	$        23,000.00	$      23,000.00