Required information The following information applies to the questions displaye

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Required information The following information applies to the questions displayed below.] Stuart 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 $260,000, 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. Prepare a schedule of cash receipts. the next month's cost of goods sold. However, ending inventory of December is expected to be $13,400. Assume that all purchases b. The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. c. The cost of goods sold is 60 percent of sales. The company desires to maintain a minimum ending inventory equal to 10 percent of are made on account. Prepare an inventory purchases budget. d. The company pays 60 percent of accounts payable in the month of purchase and 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 expense (fixed) $19,400 5% of sales 2% of Sales Sales commissions Supplies expense $ 2,800 $ 5,400 $ 6,200 $ 2,600 Utilities (fixed) Depreciation on store fixtures (fixed)* Rent (fixed) Miscellaneous (fixed) The capital expenditures budget indicates that Stuart will spend $228,400 on October 1 for store fixtures, which are expected to Use this information to prepare a selling and administrative expenses budget. have a $34,000 salvage value and a three-year (36-month) useful life f. Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are Incurred. Prepare a cash payments budget for selling and administrative expenses. g. Stuart borrows funds, in increments of $1,000, and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. It pays interest of 1 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $26,000 cash cushion. Prepare a cash budget.

Explanation / Answer

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 October November December Sales (20% growth) 260000 312000 374400 2. Schedule of Cash Receipts October November December Accounts Receivable Credit Sale 65% 169000 202800 243360 Cash Sale 35% 91000 109200 131040 Accounts Receivable 169000 202800 243360 Total Cash Receipts 91000 278200 333840 3. Inventory Purchase Budget October November December Cost of Goods Sold 60% 156000 187200 224640 Add: Ending Inventory 10% 18720 22464 13400 Cost of Goods Available for sale 174720 209664 238040 Less: Beginning Inventory 18720 22464 Purchases 174720 190944 215576 4. Cash Payment Budget for Inventory October November December Accounts Payable 60% Same Month 104832 114566 129346 40% Next Month 69888 76378 86230 Total Cash payment for Inventory 104832 184454 205723 e. Selling and Administrative Budget October November December Salary Expense 19400 19400 19400 Sales Commission 5% 13000 15600 18720 Supplies Expense 2% 5200 6240 7488 Utilities 2800 2800 2800 Depreciation 5400 5400 5400 Rent 6200 6200 6200 Miscellaneous 2600 2600 2600 Total Selling and Administrative Budget 54600 58240 62608 f. Cash Payment Budget for Selling and Admin October November December Payable Utilities (one month lag) 2800 2800 2800 Sales Commisson (one month lag) 13000 15600 18720 Salary Expense 19400 19400 19400 Supplies Expense 5200 6240 7488 Rent 6200 6200 6200 Miscellaneous 2600 2600 2600 Total Cash Payment for Selling and Admin 33400 50240 54088 21520 g. Cash Budget October November December Beginning Cash Balance 26116 26370.267 Add: Cash Receipts 91000 278200 333840 Cash Available 91000 304316 360210.27 Less: Payment -For Inventory Purchase 104832 184454 205723 - For Selling and Administrative Expense 33400 50240 54088 -Interest Expense 252 252 216 -Purchase of Store Fixtures 228400 Total Budgeted Payments 366884 234946 260027 Surplus/(Shortage) -275884 69370 100183 Financing Activity -Borrowing(repayment) 302000 -43000 -74000 Ending Cash Balance 26116 26370 26183 h. Income Statement Sales Revenue 946400 Less: Cost of Goods Sold 567840 Gross Margin 378560 Less: Selling and Administrative Expense 175448 Operating Income 203112 Less: Interest Expense 719 Net Income 202393 i. Balance Sheet Assets Cash 26183 Accounts Receivable 243360 Inventory 13400 Store Fixture 228400 Less: Accumulated Depreciation -16200 212200 Total Assets 495143 Liabilities Accounts Payable 86230 Utilities Payable 2800 Sales Commission Payable 18720 Loan Payable 185000 Interest Payable Total Liabilities 292750 Common Stock Retained Earning 202393 Total Equity 202393 Total Liabilities and Equity 495143 j. Cash Flow Cash flow from Operating Activities: -Cash Receipts from Customers 703040 -Cash payment for Inventory -495010 -Cash payment for selling and Admin -137728 -Cash payment for Interest Expense -719 Net Cash flow from Operating Activities 69583 Cash flow from Investing Activities: Purchase of Store Fixture -228400 Cash flow from Financing Activities: Receipt from Borrowing 302000 Payment of Borrowing -117000 185000 Net Increase in Cash 26183 Add: Beginning Cash Balance 0 Ending Cash Balance 26183

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