PLEASE HELP WITH E,F,G. Choice is a retail company that sells specialized garden
ID: 2526921 • Letter: P
Question
PLEASE HELP WITH E,F,G.
Choice is a retail company that sells specialized gardening products. The company is considering opening a new store on October 1, Year1. As budget coordinator, you have been asked to prepare a master budget for the first 3 months of the company’s operation. You have gathered the following information:
October sales are estimated to be $280000 of which 60 percent will be cash and the remainder will be on credit. The company expects all sales to increase at the rate of 25 percent per month for November and December. Sales in January Year 2 are expected to be $250000.
The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale.
Prepare a sales budget and a schedule of cash receipts using these facts and your excel template. Check your answers here before moving to the next part, by completing the cells requested in the chart below.
The cost of goods sold is 80 percent of sales. The company desires to maintain a minimum ending inventory equal to 30 percent of the next month’s cost of goods sold. (Ending inventory for December is based on budgeted January Year2 sales.)
Assume that all inventory purchases are made on account (on credit). The company pays 20 percent of accounts payable in the month of purchase and the remaining amount in the following month.
In excel, prepare an inventory purchases budget and a cash payments budget for inventory purchases. Use the check figures below before you continue.
Budgeted selling and administrative expenses per month follow.
Salary expense (fixed): $ 21500
Sales commissions: 3 percent of Sales
Supplies expense: 1 percent of Sales
Utilities (fixed): $2300
Depreciation on store equipment (fixed)*: You compute
Rent (fixed) $ 8000
Miscellaneous (fixed): $ 1250
*The capital expenditures budget indicates that the company will spend $450000 on October 1 for store fixtures, which are expected to have a $48000 residual value and a 48 month useful life.
Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred.
In excel, prepare the selling and administrative expenses budget and the cash payments budget for selling and administrative expenses. Check the key figures below.
Choice issued stock for 300000 on October 5. A dividend of $40000 was paid on December 15.
The company borrows and repays funds in increments of $1,000 on the last day of the month. The company also pays its vendors on the last day of the month. It pays interest of 1percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $10000 cash cushion.
Prepare a cash budget on your excel template. Check key figure below.
a. Sales Budget October November December Total-Qtr Cash sales 168000 210000 262500 640500 Sales on account 112000 140000 175000 175000 Total budgeted sales 280000 350000 437500 1067500Explanation / Answer
Answer a Sales Budget Oct Nov Dec Total Sales in $ 280,000.00 350,000.00 437,500.00 1,067,500.00 Cash Sales - 60% of Sales 168,000.00 210,000.00 262,500.00 640,500.00 Credit Sales - 40% of Sales 112,000.00 140,000.00 175,000.00 427,000.00 Answer b Schedule of Cash Receipts Oct Nov Dec Total Cash Sales 168,000.00 210,000.00 262,500.00 640,500.00 Collection from Accounts Receivables Oct Sales - 112,000.00 112,000.00 Nov Sales - - 140,000.00 140,000.00 Dec Sales - - - - Total cash Collections 168,000.00 322,000.00 402,500.00 892,500.00 Answer c Inventory Purchase Budget Oct Nov Dec Total Budgeted Cost of Goods Sold - 80% of Sales 224,000.00 280,000.00 350,000.00 854,000.00 Add: Closing Inventory 84,000.00 105,000.00 60,000.00 60,000.00 Total Needs 308,000.00 385,000.00 410,000.00 914,000.00 Less: Beginning Inventory - (84,000.00) (105,000.00) - Required Purchases in $ 308,000.00 301,000.00 305,000.00 914,000.00 Answer d Schedule of Cash payments For Inventory Oct Nov Dec Total Cash Payment Oct Purchases 61,600.00 246,400.00 308,000.00 Nov Purchases 60,200.00 240,800.00 301,000.00 Dec Purchases 61,000.00 61,000.00 Total Cash Payment to Suppliers 61,600.00 306,600.00 301,800.00 670,000.00 Answer e Selling & Admn. Budget Oct Nov Dec Total Salaries Expense 21,500.00 21,500.00 21,500.00 64,500.00 Sales Comm. - 3% of sales 8,400.00 10,500.00 13,125.00 32,025.00 Supplies Expense - 1% of Sales 2,800.00 3,500.00 4,375.00 10,675.00 Utilities 2,300.00 2,300.00 2,300.00 6,900.00 Depreciation on Store Fixtures 8,375.00 8,375.00 8,375.00 25,125.00 Rent 8,000.00 8,000.00 8,000.00 24,000.00 Miscellaneous 1,250.00 1,250.00 1,250.00 3,750.00 Total 52,625.00 55,425.00 58,925.00 166,975.00 Depreciation expense per Month = ($450,000 - $48,000) / 48 Months = $8,375 per month Schedule of Cash payments of Selling & Admn. Budget April May June Total Salaries Expense 21,500.00 21,500.00 21,500.00 64,500.00 Sales Comm. - 3% of sales - 8,400.00 10,500.00 18,900.00 Supplies Expense - 1% of Sales 2,800.00 3,500.00 4,375.00 10,675.00 Utilities - 2,300.00 2,300.00 4,600.00 Rent 8,000.00 8,000.00 8,000.00 24,000.00 Miscellaneous 1,250.00 1,250.00 1,250.00 3,750.00 Total 33,550.00 44,950.00 47,925.00 126,425.00 Answer f. Cash budget April May June Total Opening cash Balance - 10,850.00 10,420.00 - Add: receipts Issuance of Stock 300,000.00 - - 300,000.00 Collection from Customers 168,000.00 322,000.00 402,500.00 892,500.00 Total Cash available 468,000.00 332,850.00 412,920.00 1,192,500.00 Less: Disbursements For Inventory Purchase 61,600.00 306,600.00 301,800.00 670,000.00 Selling & Admn. Exp. 33,550.00 44,950.00 47,925.00 126,425.00 Purchase of Equipment 450,000.00 - - 450,000.00 Dividend Paid - - 40,000.00 40,000.00 Interest Expense - 880.00 1,180.00 2,060.00 Total Budgeted Payments 545,150.00 352,430.00 390,905.00 1,288,485.00 Cash Balance before Borrow / Repay (77,150.00) (19,580.00) 22,015.00 (95,985.00) Add: Financing 88,000.00 30,000.00 118,000.00 Less: Borrowing Repayment - (12,000.00) (12,000.00) Net Cash Balance Closing 10,850.00 10,420.00 10,015.00 10,015.00
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