Nordic Company, a merchandising company, prepares its master budget on a quarter

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:

Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following the sale. The accounts receivable at March 31 are a result of March credit sales.

Monthly selling and administrative expenses are budgeted as follows: salaries and wages, $6,000 per month; shipping, 6% of sales; advertising, $4,800 per month; other expenses, 4% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $4,000 for the quarter.

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, $9,000; and May, $7,000.

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.

Schedule of expected cash disbursements for selling and administrative expenses:

Cash budget. (Input all amounts as positive values except cash deficiency, repayments and interest which should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Total Financing should be indicated with a minus sign when the company is repaying amounts that were previously borrowed.)

Prepare an absorption costing income statement for the quarter ending June 30. (Input all amounts as positive values.)

Prepare a balance sheet as of June 30. (Be sure to list the assets and liabilities in order of their liquidity.)

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.

Explanation / Answer

For remaing parts of this question, please put them as a new question.

Nordic Company Schedule of cash collections   April May June Total Sales $68,000 $78,000 $83,000 $2,29,000 Cash sales $13,600 $15,600 $16,600 $45,800 Credit Sales $54,400 $62,400 $66,400 $1,83,200 Collection of credit sales $38,400 $54,400 $62,400 $1,55,200 Total collections $52,000 $70,000 $79,000 $2,01,000 Nordic Company Schedule of Purchases   April May June Total July Sales $68,000 $78,000 $83,000 $2,29,000 $38,000 Gross Margin $27,200 $31,200 $33,200 $91,600 $15,200 Cost of goods sold $40,800 $46,800 $49,800 $1,37,400 $22,800 Add: Desired Inventory $14,040 $14,940 $6,840 $6,840 Total inventory needed $54,840 $61,740 $56,640 $1,44,240 Less: Beginning Inventory $12,240 $14,040 $14,940 $12,240 Purchases required $42,600 $47,700 $41,700 $1,32,000 Nordic Company Schedule of cash payment of Purchases   April May June Total Purchases required $42,600 $47,700 $41,700 $1,32,000 Cash Disbursed for the month March $16,200 $16,200 April $21,300 $21,300 $42,600 May $23,850 $23,850 $47,700 June $20,850 $20,850    Total $37,500 $45,150 $44,700 $1,27,350 Nordic Company Schedule of cash disbursements for selling and administrative expenses   April May June Total Salaries and wages $6,000 $6,000 $6,000 $18,000 Shipping $4,080 $4,680 $4,980 $13,740 Advertising $4,800 $4,800 $4,800 $14,400 Other expenses $2,720 $3,120 $3,320 $9,160 $0 Total cash disbursements for selling and administrative expenses $17,600 $17,600 Nordic Company Cash Budget   April May June Total Cash Balance - Beginning $9,000 $8,900 $14,510 $9,000 Add Cash Collections $52,000 $70,000 $79,000 $2,01,000 $0 Total Cash Available $61,000 $78,900 $93,510 $2,10,000 Less: Cash Disbursements:     For Inventory purchases $37,500 $45,150 $44,700 $1,27,350     For Selling and administrative expenses $17,600 $0 $0 $17,600     For equipment purchases $9,000 $7,000 $16,000     For dividends $2,000 $2,000 $0 Total Cash Disbursements: $64,100 $52,150 $46,700 $1,62,950 Excess (deficiency) of cash -$3,100 $26,750 $46,810 $47,050 Financing    Borrowings $12,000 $12,000    Repayment -$12,000 -$12,000 Interest -$240 -$240 $0 Total Financing $12,000 -$12,240 $0 -$240 Cash Balance - Ending $8,900 $14,510 $46,810 $46,810

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

---

---

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