Developing a Master Budget for a Merchandising Organization Peyton Department St
ID: 2479542 • Letter: D
Question
Developing a Master Budget for a Merchandising Organization Peyton Department Store prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for 2010. PEYTON DEPARTMENT STORE Balance Sheet March 31, 2010 Assets Liabilities and Stockholders' Equity Cash $2,000 Accounts payable $26,000 Accounts receivable 25,000 Dividends payable 17,000 Inventory 30,000 Rent payable 1,000 Prepaid Insurance 2,000 Stockholders' equity 40,000 Fixtures 25,000 Total assets $84,000 Total liabilities and equity $84,000 Actual and forecasted sales for selected months in 2010 are as follows: Month Sales Revenue January $70,000 February 50,000 March 40,000 April 50,000 May 60,000 June 70,000 July 90,000 August 80,000 Monthly operating expenses are as follows: Wages and salaries $26,000 Depreciation 100 Utilities 1,000 Rent 1,000 Cash dividends of $17,000 are declared during the third month of each quarter and are paid during the first month of the following quarter. Operating expenses, except insurance, rent, and depreciation are paid as incurred. Rent is paid during the following month. The prepaid insurance is for five more months. Cost of goods sold is equal to 50 percent of sales. Ending inventories are sufficient for 120 percent of the next month's sales. Purchases during any given month are paid in full during the following month. All sales are on account, with 50 percent collected during the month of sale, 40 percent during the next month, and 10 percent during the month thereafter. Money can be borrowed and repaid in multiples of $1,000 at an interest rate of 12 percent per year. The company desires a minimum cash balance of $2,000 on the first of each month. At the time the principal is repaid, interest is paid on the portion of principal that is repaid. All borrowing is at the beginning of the month, and all repayment is at the end of the month. Money is never repaid at the end of the month it is borrowed.
(a) Prepare a purchases budget for each month of the second quarter ending June 30, 2010.
Peyton Department Store
Monthly Purchase Budget
Quarter Ending June 30, 2010
Budgeted purchases for?
April?
May
June?
Total?
Explanation / Answer
Apr May June Total sales 50000 60000 70000 180000 cost of goods sold [.50*sales] 25000 [50000*.50] 30000 35000 90000 Add:ending inventory 72000 [60000*120%] 84000 [70000*1.20] 108000 [90000*1.2] 264000 Less:Beginning inventory -60000 [50000*1.2] - 72000 - 84000 - 216000 Purchase 37000 42000 59000 138000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.