Question

Problem 07-8AA Merchandising: Preparation of a complete master budget LO P4 Near the end of 2019, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2019. DIMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2019 $ 35,000 520,000 157.500 712,500 552,000 69,000 483,000 $1,195,500 Cash Accounts receivable Inventory Total current assets Equipment Less: Accumulated depreciation Equipment, set Total assets Liabilities and Equity Accounta payable Bank loan payable Taxes payable dae 3/15/2020 Total liabilities Common stock Retained sarning Total stockholders' equity Total liabilities and equity 370.000 470,000 474,500 725,500 01.195,500 To prepare a master budget for January February, and March of 2020, management gathers the following information, a. The company's single product is purchased for $30 per unit and resold for $59 per unit. The expected Inventory level of 5.250 units on December 31, 2019, is more than management's desired level, which is 20% of the next month's expected sales in units). Expected sales are January, 6.750 units; February 9,000 units: March, 11.250 units and April 9,000 units. b. Cash sales and credit sales represent 20% and 80%, respectively, of total sales. Of the credit sales. 65% is collected in the first month after the month of sale and 35% in the second month after the month of sale. For the December 31, 2019, accounts receivable balance, $125,000 is collected in January 2020 and the remaining $395.000 is collected in February 2020 c. Merchandise purchases are paid for as follows: 20% in the first month after the month of purchase and 80% in the second month after the month of purchase. For the December 31, 2019, accounts payable balance. $60,000 is paid in January 2020 and the remaining $310.000 is paid in February 2020. d. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $66,000 per year. e. General and administrative salaries are $132,000 per year. Maintenance expense equals $1800 per month and is paid in cash. t Equipment reported in the December 31, 2019, balance sheet was purchased in January 2019. it is being depreciated over eight years under the straight line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter January, $33,600; February $98,400; and March, $26,400. This equipment will be depreciated under the straight line method over eight years with no salvage value. A full month's depreciation is taken for the month in which equipment is Durchased

Answer 1

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. 1. Sales Budget Last year Jan Budgeted sales units Budgeted Selling Price Total Sales Cash Sales Sales on Account Current year Feb Mar 6,750 9,000 59 $ 59 $ 398,250 531,000 79,650 $ 106,200 $ 318,600 $ 424,800 $ Working Total Apr 11,250 27,000 9,000 59 $ 59 $ 59 663,750 1,593,000 531,000 132,750 $ 318,600 531,000 $ 1,274,400 20% of Sale 80% of Sale $ Jan Mar Receivable Feb $ Total 520,000 125,000 395,000 1a. Cash Receipt Budget Accounts Receivable on Jan 1 Credit Sale from: January February March $ 207,090 $ $ 111,510 $ 276,120 $ 318,600 276,120 $ $ 148,680 531,000 $ 679,680 Total Collection from receivable Cash Sale Total Collection 125,000 $ 79,650 $ 204,650 $ 602,090 $ 106,200 $ 708,290 $ 387,630 132,750 520,380 $ $ $ 1,114,720 318,600 1,433,320 $ 2. Purchase Budget Jan Feb Mar Apr 9,000 20% Budgeted Sales in units Add: Desired ending inventory Units available Less: Beginning Inventory Budgeted Purchase Cost per Unit Budgeted Purchase 6,750 1,800 8,550 -5,250 3,300 30.00 99,000 9,000 2,250 11,250 -1,800 9,450 30.00 $ 283,500 11,250 1,800 13,050 -2,250 10,800 30.00 324,000 Total 27,000 1,800 28,800 -5,250 23,550 $ 30.00 706,500 $ 2a. Cash Disbursment Budget Jan Feb Mar Total Payable 60,000 $ 310,000 $ 370,000 Accounts Payable Jan 1 Merchandise purchased in: January February March $ 19,800 $ $ 79,200 56,700 $ $ $ 99,000 56,700 - $ $ 226,800 324,000 Total Payment for Purchases of Material 60,000 $ 329,800 $ 135,900 $ 525,700 $ 550,800 3. Monthly Selling Expense Budgets Jan Feb Mar Total Sales Commission Sales Salaries 20% of Sale $66,000/12 79,650 $ 5,500 $ 106,200 5,500 $ $ 132,750 $ 5,500 $ 318,600 16,500 Total Budgeted Selling Expense 85,150 $ 111,700 $ 138,250 $ 335,100

4. Monthly General and Admin Expense Jan Feb Mar Total $132,000/12 $ General and Admin Salaries Maintenance Expense Total General and Admin Expense 11,000 $ 1,800 $ 12,800 $ 11,000 $ 1,800 $ 12,800 $ 11,000 $ 1,800 $ 12,800 $ 33,000 5,400 38,400 C $ 5. Capital Expenditure budget Jan Feb Mar Total 33,600 $ 98,400 Equipment Land $ $ 26,400 $ 140,000 $ 158,400 140,000 Total Capital expenditure payment 33,600 $ 98,400 $ 166,400 $ 298,400 6. Summary Cash Budget Jan Beginning Cash Balance Add: Cash Collection Total cash Available Feb Mar 35,000 $ 37,100 $ 204,650 $ 708,290 $ 239,650 $ 745,390 $ 192,690 520,380 713,070 Total $ 35,000 $ 1,433,320 $ 1,468,320 $ Cash Payment for: Merchandise purchase Selling Expense General and Admin Salaries Capital Expenditure Taxs Payment $ $ 60,000 $ 85,150 $ 12,800 $ 33,600 $ 329,800 $ 111,700 $ 12,800 $ 98,400 $ $ 135,900 $ 138,250 $ 12,800 $ 166,400 $ 89,000 $ 525,700 335,100 38,400 298,400 89,000 Total Payment $ 191,550 $ 552,700 $ 542,350 $ 1,286,600 $ 48,100 $ 192,690 $ 170,720 Preliminary Cash Balance Financing: Borrowing Repayment $ $ $ $ - 11,000 181,720 - - -11,000 - . 170,720 $ $ 170,720 $ Ending Balance 37,100 $ 192,690 $ Part 6 Analysis of Short Term Financing Needs $ - $ Loan Balance-Beginning Additiona Loan/(Loan Repayment) Loan Balance at end of month 11,000 -11,000 - $ $ $ 11,000 -11,000 . $ - $ -

Part 7: Income Statement $ $ $ 1,593,000 -810,000 783,000 335,100 38,400 $ Sales Revenue Less: Cost of Goods Sold Gross Profit Less: Selling and Admin Expense Selling Expense General and Admin Salaries Depreciation: Beginning Balance Equipment Jan Pur Feb Pur Mar Pur Total Selling and Admin Expense Income before tax Less: Income Tax 35% Net Income $552,000/8*3/12 $33,600/8*3/12 $98,400/8*2/12 $26,400/8*1/12 $ $ $ $ 17,250 1,050 2,050 275 -394,125 388,875 -136,106 252,769 Part 7a: Retained Earning-Working $ 251,000 252,769 Retained Earning, Beginning Balance Add: Net Income Less: Dividend Retained Earning, Ending Balance $ 503,769 Part 8: Budgeted Balance sheet 170,720 679,680 54,000 904,400 $ $ Cash Accounts receivable Inventory Total Current Assets Plant, property and Equipment: Land Equipment Less: Accumulated Depreciation Total assets $ 140,000 $ $ 710,400 -89,625 $ $ 620,775 1,665,175 $ Accounts payable Tax Payable Total Liabilities 550,800 136,106 686,906 $ 474,500 503,769 $ Common Stock Retained earnings Total stockholder's Equity Total liabilities and stockholders' equity $ $ 978,269 1,665,175 $