A relatively new company, Wine To End Whining, Inc., has determined they need to

Question

A relatively new company, Wine To End Whining, Inc., has determined they need to engage in a budgeting process as part of their new strategic plan. The Company has asked you to provide the following items for the months of January, February, and March of 2017: A) a Purchases Budget; B) a Cash Budget; C) a Budgeted Income Statement; and D) a Budgeted Balance Sheet. They have provided you with the planning document below and also, with their December 31, 2016 Balance Sheet. Please complete the four items requested on Worksheet Tabs A, B, C, and D of this Workbook.

Use the information provided on the December 31, 2016 Balance Sheet shown below to help you create the budgeting documents requested.

It will be paid on February 15.

WINE TO END WHINING, INC. PLANNING DATA FOR 2017 All Sales are on Credit       Collections of Accounts Receivable: Month of Service 56% Month following Service 44% Actual December 2016 Sales $   200,000 Expected Sales in Dollars January $   220,000 February $   193,000 March $   178,000       April $   201,000 Cost of Goods Sold as a percentage of selling price. 60% Planned ending inventory as a percentage of next month's required inventory. 65% Purchases are are all on credit. Purchases paid in current month 30% Purchases paid in next month 70% Sales commission as a percent of sales 3% Sales commission are paid one month after the month incurred. Advertising expenses have a fixed and variable portion: Fixed portion $4,200 The fixed portion of the advertising is paid in the current month. Variable portion as a percentage of sales 1% The variable portion is paid one month after the month incurred. Insurance policy: Months of insurance coverage paid for 12 The policy period is from February 1 to January 31 each year The premium to be paid on February 1, 2017 is $18,000 The premium will be charged to prepaid insurance Selling and Administrative expenses have a fixed and variable portion: Fixed portion is paid in the month incurred $29,000 Variable portion as a percentage of sales 2% Variable S&A expenses are paid one month after the month incurred Depreciation expense per month $5,000 The annual interest rate on the long term debt is 3.5% Interest is incurred on the principal balance outstanding each month. Interest is paid on a quarterly basis. Interest for December to February will be paid March 1. No principal payments are scheduled to be made on the long-term debt until September of 2017 Income Tax rate 30% Accrued taxes are paid on the 15th of January, April, July and October The Company's Board of Directors plans to declare a dividend on January 20 $12,000

It will be paid on February 15.

WINE TO END WHINING, INC. BALANCE SHEET December 31, 2016 ASSETS Current Assets Cash $       103,200 Accounts Receivable              88,000 Inventory              85,800 Prepaid Insurance                1,500 Total Current Assets           278,500 Property Plant and Equipment Office Equipment           300,000 Accumulated Depreciation           (60,000) Total Property Plant and Equipment           240,000 Total Assets $       518,500 LIABILITIES AND SHAREHOLDERS EQUITY LIABILITIES Current Liabilities Accounts Payable - Purchases $         89,460 Sales Commission Payable                6,000 Selling and Admin Payable                4,000 Advertising Payable                2,000 Interest Payable                    467 Dividends Payable                       -   Income Taxes Payable              14,970 Total Current Liabilities           116,897 Long Term Debt           160,000 Total Liabilities           276,897 SHAREHOLDERS' EQUITY Common Stock           124,000 Retained Earnings           117,603 Total Shareholders' Equity           241,603 Total Liabilities and Shareholders Equity $       518,500 WINE TO END WHINING, INC. PLANNED CASH TRANSACTIONS and CASH BUDGET For the Month Ending, Jan 31, 2017 Feb 28, 2017 Mar 31, 2017 CASH IN 56% This Month's Sales 44% of Last Month's Sales Total Cash Receipts CASH OUT 70% Last Month's Purchases 30% This Month's Purchases Commissions Advertising Selling & Admin. Insurance Interest Dividends Income Tax Total Cash Disbursements CASH BUDGET Beginning Balance of Cash Cash Receipts Cash Available Cash Disbursements Ending Cash Balance

Explanation / Answer

A.

B.

Wine to End Whining Inc. Purchases Budget For the three months ended March 2017 January February March Total Cost of Goods Sold ( 60% of sales) $ 132,000 $ 115,800 $ 106,800 $ 354,600 Add: Desired Ending Inventory ( 65 % of next month COGS) 75,270 69,420 78,390 78,390 Total Needs 207,270 185,220 185,190 432,990 Less: Beginning Inventory 85,800 75,270 69,420 85,800 Budgeted Purchases 121,470 109,950 115,770 347,190

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.