[The following information applies to the questions displayed below.] Near the e
ID: 2432219 • Letter: #
Question
[The following information applies to the questions displayed below.]
Near the end of 2015, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2015.
To prepare a master budget for January, February, and March of 2016, management gathers the following information.
Dimsdale Sports’ single product is purchased for $20 per unit and resold for $54 per unit. The expected inventory level of 5,500 units on December 31, 2015, is more than management’s desired level for 2016, which is 20% of the next month’s expected sales (in units). Expected sales are: January, 7,250 units; February, 9,500 units; March, 10,750 units; and April, 10,500 units.
Cash sales and credit sales represent 25% and 75%, respectively, of total sales. Of the credit sales, 61% is collected in the first month after the month of sale and 39% in the second month after the month of sale. For the December 31, 2015, accounts receivable balance, $125,000 is collected in January and the remaining $395,000 is collected in February.
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 December 31, 2015, accounts payable balance, $80,000 is paid in January and the remaining $295,000 is paid in February.
Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $78,000 per year.
General and administrative salaries are $144,000 per year. Maintenance expense equals $2,200 per month and is paid in cash.
Equipment reported in the December 31, 2015, balance sheet was purchased in January 2015. It is being depreciated over eight years under the straight-line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter: January, $38,400; February, $96,000; and March, $28,800. This equipment will be depreciated under the straight-line method over eight years with no salvage value. A full month’s depreciation is taken for the month in which equipment is purchased.
The company plans to acquire land at the end of March at a cost of $175,000, which will be paid with cash on the last day of the month.
Dimsdale Sports 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 on the last day of the month. The company has agreed to maintain a minimum ending cash balance of $26,325 in each month.
The income tax rate for the company is 39%. Income taxes on the first quarter’s income will not be paid until April 15.
Prepare a master budget for each of the first three months of 2016; include the following component budgets:
5.
value:
15.00 points
Required information
References
eBook & Resources
Expanded tableDifficulty: 3 HardLearning Objective: 22-P4 Appendix-Prepare each component of a master budget and link each to the budgeting process-for a merchandising company.
Check my work
6.
value:
15.00 points
Required information
Monthly cash budgets.
References
eBook & Resources
Expanded tableDifficulty: 3 HardLearning Objective: 22-P4 Appendix-Prepare each component of a master budget and link each to the budgeting process-for a merchandising company.
Check my work
7.
value:
15.00 points
Required information
Budgeted income statement for the entire first quarter (not for each month).
References
eBook & Resources
Expanded tableDifficulty: 3 HardLearning Objective: 22-P4 Appendix-Prepare each component of a master budget and link each to the budgeting process-for a merchandising company.
Check my work
8.
value:
15.00 points
Required information
Budgeted balance sheet as of March 31, 2016.
References
eBook & Resources
Expanded table
Near the end of 2015, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2015.
Explanation / Answer
Master budget for First quarter Items January February March Quarter Budgeted sales in units 7250 9500 10750 27500 Budgeted sales price per unit $54 $54 $54 $54 Sales revenue $391,500 $513,000 $580,500 $1,485,000 Cash Sales $97,875 $128,250 $145,125 $371,250 Credit Sales $293,625 $384,750 $435,375 $1,113,750 Cash collection for credit sales for Dec $125,000 $395,000 $520,000 Cash collection for credit sales for Jan $179,111 $114,514 $293,625 Cash collection for credit sales for feb $234,698 $234,698 Total Cash Reciepts $222,875 $702,361 $494,336 $1,419,573 Budgeted sales in units 7250 9500 10750 27500 Add: Ending Inventory (20%) 1900 2150 2100 2100 Less: Beginning Inventory 5500 1900 2150 5500 Budgeted purchase units 3650 9750 10700 24100 Purchase price per unit $20 $20 $20 $20 Purchase cost $73,000 $195,000 $214,000 $482,000 Cash paid for mechandise of Dec $80,000 $295,000 $375,000 Cash paid for mechandise of Jan $14,600 $58,400 $73,000 Cash paid for mechandise of Feb $39,000 $39,000 Cash paid for invontory $80,000 $309,600 $97,400 $487,000 Sales commission $78,300 $102,600 $116,100 $297,000 Sales Salaries $6,500 $6,500 $6,500 $19,500 General and administrative salaries $12,000 $12,000 $12,000 $36,000 Maintenance expenses $2,200 $2,200 $2,200 $6,600 Taxes paid $90,000 Total cash disbursement $179,000 $432,900 $324,200 $936,100 Capital Expenditure New equipment purchase $38,400 $96,000 $28,800 $163,200 New land purchase $175,000 $175,000 Total Capital expenditure $38,400 $96,000 $203,800 $338,200 Total Cash Outflow $217,400 $528,900 $528,000 $1,274,300 Net cash inflow $5,475 $173,461 ($33,664) $145,273 Minimum balance requirement $26,325 $26,325 $26,325 $26,325 Beginning Cash Balance $36,000 $26,325 $199,786 $36,000 Cash inflow $5,475 $173,461 ($33,664) $145,272 Additional loan required Loan repaid $15,000 $15,000 Interest paid $150 $150 Ending Cash Balance $26,325 $199,786 $166,122 $166,122
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