Reference no: EM13670230
PROBLEM 7–25B Completing a Master Budget [LO2, LO4, LO7, LO8, LO9, LO10]
CHECK FIGURE
(2) May purchases: $52,640
(4) May 31 cash balance: $5,600
The following data relate to the operations of Dillinger Company, a wholesale distributor of consumer goods:
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Current assets as of March 31:
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Cash
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$10,500
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Accounts receivable
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$21,000
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Inventory
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$10,080
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Buildings and equipment (net)
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$140,000
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Accounts payable
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$36,500
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Capital stock
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$40,000
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Retained earnings
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$105,080
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a. Gross margin is 30% of sales.
b. Actual and budgeted sales data:
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March (actual)
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$70,000
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April
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$72,000
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May
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$73,000
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June
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$84,000
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July
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$80,000
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c. Sales are 70% for cash and 30% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are the result of March credit sales.
d. Each month’s ending inventory should equal 20% of the following month’s budgeted cost of goods sold.
e. 25% of a month’s inventory purchases are paid for in the month of purchase; the remainder is paid for in the following month. The accounts payable at March 31 are a result of March purchases of inventory.
f. Monthly expenses are as follows: salaries and wages $12,500; rent, $3,600 per month; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $1,000 per month (includes depreciation on new assets).
g. Equipment costing $9,000 will be purchased for cash in April.
h. The company must maintain a minimum cash balance of $5,000. An open line of credit is available at a local bank. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month; borrowing must be in multiples of $1,000. The annual interest rate is 12%. Interest is paid only at the time of repayment of principal; figure interest on whole months (1/12, 2/12, and so forth).
Required:
Using the above data:
1. Complete the following schedule:
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Schedule of Expected Cash Collections
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April
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May
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June
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Quarter
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Cash sales
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Credit sales
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Total collections
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2. Complete the following:
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Merchandise Purchases Budget
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April
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May
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June
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Quarter
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Budgeted cost of goods sold*
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$50,400
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$51,100
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Add desired ending inventory†
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10,220
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Total needs
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60,620
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Less beginning inventory
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10,080
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Required: purchases
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$50,540
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*For April sales: $72,000 sales × 70% cost ratio = $50,400
†$51,100 × 20% = $10,220
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Schedule of Expected Cash Disbursements—Merchandise Purchases
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April
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May
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June
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Quarter
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March purchases
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$36,500
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$36,500
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April purchases
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12,635
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$37,905
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50,540
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May purchases
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June purchases
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Total disbursements
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$49,135
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3. Complete the following:
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Schedule of Expected Cash Disbursements—Selling and Administrative Expenses
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April
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May
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June
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Quarter
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Salaries and wages
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$12,500
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Rent
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3,600
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Other expenses
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5,760
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Total disbursements
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$21,860
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4. Complete the following cash budget:
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Cash Budget
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April
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May
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June
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Quarter
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Cash balance, beginning
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$10,500
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Add cash collections
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71,400
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Total cash available
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81,900
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Less cash disbursements.
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For inventory
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49,135
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For expenses
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21,860
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For equipment
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9,000
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Total cash disbursements
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79,995
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Excess (deficiency) of cash
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1,905
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Financing:
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Etc.
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5. Prepare an absorption costing income statement similar to Schedule 9 for the quarter ending June 30. (Use the functional format in preparing your income statement, as shown in Schedule 9 in the text.)
6. Prepare a balance sheet as of June 30.
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Determine the cost assigned to ending inventory
: Determine the cost assigned to ending inventory and to cost of goods sold using LIFO and Determine the cost assigned to ending inventory and to cost of goods sold using LIFO.
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Complete the following statements
: Using the data above, complete the following statements and schedules for the second quarter:
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Prepare an absorption costing income statement
: Prepare an absorption costing income statement similar to Schedule 9 for the quarter ending June 30. (Use the functional format in preparing your income statement, as shown in Schedule 9 in the text.)
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A schedule of expected cash collections on sales
: 1. Prepare the following, by quarter and in total, for Year 2: a. A schedule of expected cash collections on sales.b. A schedule of expected cash disbursements for merchandise purchases.
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: Prepare a schedule of expected cash collections for April, May, and June and for the three months in total. 2. Prepare a cash budget, by month and in total, for the three-month period.
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Prepare a schedule of expected cash collections
: Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total.
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Prepare a cash budget for june
: Prepare a cash budget for June. Support your budget with a schedule of expected cash collections from sales and a schedule of expected cash disbursements for inventory purchases.
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