Prepare a master budget for the first three months of 2016

Assignment Help Accounting Basics
Reference no: EM131003475

Near the end of 2015, the management of Isle Corp., a merchandising company, prepared the following estimated balance sheet for December 31, 2015.

1478_Untitled picture.png

To prepare the master budget for January, February and March of 2016, management gathers the following information

a. Isle Corp.'s single product is purchased for $30 per unit and resold for $45 per unit. The expected inventory level of 5,000 units on December 31, 2015, is more than management's desired level for 2015, which is 25% of the next month's expected sales (in units). 
Expected sales are: January, 6,000 units; February, 8,000 units; March, 10,000 units; and April, 9,000 units.

b. Cash sales and credit sales represent 25% and 75%, respectively, of total sales. Of the credit sales, 60% is collected in the first month after the month of sale and 40% in the second month after the month of sale. For the $525,000 accounts receivable balance at December 31, 2015, $315,000 is collected in January 2016 and the remaining $210,000 is collected in February 2016.

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 $360,000 accounts payable balance at December 31, 2015, $72,000 is paid in January 2016 and the remaining $288,000 is paid in February 2016.

d. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $90,000 per year.

e. General and administrative salaries are $144,000 per year. Maintenance expense equals $3,000 per month and is paid in cash.

f. Equipment reported in the December 31, 2015 balance sheet was purchased in January 2015. It is being depreciated over 8 years under the straight-line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter:
January, $72,000; February, $96,000; and March, $28,800. This equipment will be depreciated using the straight-line method over 8 years with no salvage value. A full month's depreciation is taken for the month in which equipment is purchased.

g. The company plans to acquire land at the end of March at a cost of $150,000, which will be paid with cash on the last day of the month.

h. Isle Corp. has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and interest is paid at each month-end based on the beginning balance. Partial or full payments on these loans can be made o the last day of the month. Isle has agreed to maintain a minimum ending cash balance of $36,000 in each month.

i. The income ta rate for the company is 40%. Income taxes on the first quarter's income will not be paid until April 15.

Prepare a master budget for the first three months of 2016. Round to the nearest dollar.

Reference no: EM131003475

Explain the basic characteristics of bonds

Although all bonds have some common characteristics, they do not always have the same contractual features. For example, most corporate bonds have provisions for early repay

Create an amortization schedule for the first two months

You have borrowed $70,000 to buy a speed boat. You plan to make monthly payments over a 15-year period. The bank has offered you a 9% interest rate, compounded monthly. Crea

Luster cost of goods sold

Luster Company has current assets of $130,000 and current liabilities of $80,000, of which accounts payable are $70,000. Luster's cost of goods sold is $460,000, its merchan

Alphabetical listing of all parents or guardians

An alphabetical listing of all parents or guardians is available for selecting the sample. In each of the following descriptions of the method of selecting the 1,000 partici

Retail inventory method with average

Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4

Contract with the intent of hedging an account payable

A company enters into a futures contract with the intent of hedging an account payable of DM400,000 due on December 31. The contract requires that if the U.S. dollar value o

Percentage-of-completion method

What would be the effect of the project on 2009 operating income under the percentage-of-completion method and the completed contract method?

Allowance for doubtful accounts problem

Which of the following is most likely to be used in determining a proper amount to be included in the allowance for doubtful accounts?

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd