TEST 24 CHS 78 3 Che assembled to assist in preparing the ma

TEST 24 CHS 7&8 3 Che assembled to assist in preparing the master budget for the first quarter a. As of December 31 (the end of the prior quarter), the company\'s general ledger showed the following account balances: 219,200 61,350 374,000 92,325 500,000 Conmon stock Retained earnings s 718, 550 b. Actual sales for December and budgeted sales for the next four months are as follows: January February March April 274,000 $409,000 $606,000 $321,000 $217,000 Sales are 20% for cash and 80% on credit. Al payments on credit sales are collected in the month following sale. The accounts d. The company\'s gross margin is 40% of sales. Cin other words, cost of goods sold is 60% of sales.) at December 31 are a result of y expenses are budgeted as follows: salaries and wages, S39,000 per month: advertising, S57000 per month, shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $45,940 for the quarter f, Each month\'s ending inventory should equal 25% of the following month\'s cost of goods sold. g. One-half of a month\'s inventory purchases is paid for in the month of purchase; the other half is paid in the following month. h. During February, the company will purchase a new copy machine for $3,400 cash. During March, other equipment will be purchased for cash at a cost of $82,000

Solution

1)                       Schedule of Expected cash collections                      January Feburary March Quarter Cash sales 81800 121200 64200 267200 Credit sales 219,200 327200 484800 1,031,200 total collections 301000 448400 549000 1298400 Accounts receivable at march 31=321,000*80%= 256800 2-a) Merchandise purchase budget January Feburary March Quarter April budgeted cost of goods sold 245400 363600 192600 801600 130200 Add:Ending inventory 90900 48150 32550 32,550 total needs 336300 411750 225150 834150 less Beginning inventory 61,350 90,900 48,150 61,350 Required purchases 274,950 320,850 177,000 772,800 2-b) Schedule of Expected cash disbursement for Merchandise purchase January Feburary March Quarter December purchases 92,325 92,325 january purchases 137475 137475 274950 Feburary purchases 160425 160425 320850 march purchases 88500 88500 total cash disbursement for purchases 229,800 297900 248925 776,625 Accounts payable= 88,500 3) Cash budget January Feburary March Quarter Beginning cash balance 64,000 30,480 33100 64,000 Add cash collections 301000 448400 549000 1298400 total cash available 365,000 478880 582100 1,362,400 less cash disbursements purchase of inventory 229,800 297900 248925 776,625 selling and adm expense 128720 144480 121680 394880 purchase of equipment 0 3,400 82,000 85400 cash dividends 45,000 0 0 45,000 total cash disbursement 403,520 445780 452605 1,301,905 Excess(Deficiency) of cash -38,520 33100 129495 60,495 Financing Borrowings 69,000 0 0 69,000 Repayments 0 0 -69,000 -69000 interest 0 0 -2,070 -2070 total financing 69,000 0 -71070 -2,070 ending cash balance 30,480 33100 58425 58,425 interest expense = 69000*1%*3 2070 4) income statememt Sales 1336000 cost of goods sold Beginning invnetory 61,350 Add purchases 772,800 cost of goods avaialble 834,150 less ending inventory 32,550 801,600 Gross profit 534,400 Selling and administrative exp Salaries and wages 117,000 Advertising 171,000 shiiping 5% of sales 66800 other expense 3% of sales 40080 Depreciation 45,940 440,820 operating income 93,580 less interest expense 2,070 Net income 91,510 5) Balance sheet Asses current assets cash 58425 Account receivable 256,800 inventory 32,550 total current assets 347,775 buildings and Equipment (net) (374000+3400+82000-45940) 413460 total assets 761,235 liabilities & stockholders Equity current liabilities Accounts payable 88,500 total current liabilities 88,500 Stockholders Equity common stock 500,000 Retained earnings (126225+88,160-45000) 172,735 total stockholders equity 672,735 total liabilities & stockholders equity 761,235