Nordic Company, a merchandising company, prepares its master budget on a quarter
ID: 2423717 • Letter: N
Question
Nordic Company, a merchandising company, prepares its master budget on a quarterly basis. The
following data have been assembled to assist in preparation of the master budget for the second quarter.
As of March 31 (the end of the prior quarter). the company's balance sheet showed the following account
balances:
Actual sales for March and budgeted sales for April-July are as follows:
Cash 9000
Accounts receivable 48,000
Inventory 12600
Buildings and equipment (net) 214,100
Accounts Payable 18300
Capital stock 190,000
Retained earnings 75,400
283,700 283,700
Actual sales for march and budgeted sales for april-july are as follows:
March (actual) 60,000
April 70,000
May 85,000
June 90,000
July 50,000
Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in t he month
following the sale. The accounts receivable at March 31 are a result of March credit sales.
The company's gross margin percentage is 40% of sales. (In other words. cost of goods sold is 60% of
sales.)
Monthly selling and administrative expenses are budgeted as follows: salaries and wages, $7,500 per month; shipping, 6% of sales; advertising, $6,000 per month; other expenses. 4% of sales. Depreciation. including depreciation on new assets acquired during the quarter, will be $6,000 for the quarter.
Each month's ending inventory should equal 30% of the following month's cost of goods sold.
Half of a month's inventory purchases are paid for in the month of purchase and half in the following
month.
Equipment purchases during the quarter will be as follows: April. $11,500: and May. $3,000.
Dividends totaling $3,500 will be declared and paid in June.
Management wants to maintain a minimum cash balance of $8,000.The company has an agreement with a local bank that allows the company to borrow in increments of $1.000 at the beginning of each month, up to a total loan balance of $20,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded.
The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter
Required:
Using the data above, complete the following statements and schedules for the second quarter:
Schedule of expected cash collections:
april may june total
Cash sales 14,000
Credit sales 48,000
Total collections 62,000
Would you please help me complete this
Explanation / Answer
Expected Cash Collections - April
Sales of April = 70,000
Credit sales of April = 70,000 X 80% = 56,000
Expected Cash Collections- May
Sales of may = 85,000
Credit sales of may = 85,000 X 80% = 68,000
Expected Cash Collections- June
Sales of June = 90,000
Credit sales of June = 90,000 X 80% = 72,000
Expected Cash Collections- July
Sales of July = 50,000
Credit sales of July = 50,000 X 80% = 40,000
Particulars Amount Cash Sales of April ( 70,000 X 20%) 14,000 Accounts receivable of March 48,000 Total 62,000Related Questions
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