Adams Company ls a retail company that specializes in selling outdoor camping eq
ID: 2546088 • Letter: A
Question
Adams Company ls a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1,2019. The company president formed a planning committee to prepare a master budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks: Problem 14-23 Part1 Required a. October sales are estimated to be $200,000, of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 25 percent per month. Prepare a sales budget. b. The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. Prepare a schedule of cash receipts. maintain a minimum ending inventory equal to 10 percent of of goods sold. However, ending inventory of December is expected to be $12,000. Assume that all purchases are made on account. Prepare an inventory purchases budget. d. The company pays 70 percent of accounts payable in the month of purchase and the remaining 30 percent in the following month Prepare a cash payments budget for inventory purchases. e. Budgeted selling and administrative expenses per month follow Salary expense (fixed) $18,000 5 % of Sales 2 of Sales Supplies expense Utilities (fixed) Depreclation Rent (fixed) s 1,400 4,000 s 4,800 s 1,200 The capital expenditures budget indicates that Adams will spend $164,000 on October 1 for store fixtures, which are expected to have a $20,000 salvage value and a three-year (36-month) useful life. nistrative expenses budget Use this information to prepare a selling and a f. Utilities and sales commissions are paid the month after they are incurred, all 1.2 of 2 Next>Explanation / Answer
Answer a Sales Budget Oct Nov Dec Total Sales 200,000 250,000 312,500 762,500 Cash Sales - 40% 80,000 100,000 125,000 305,000 Credit Sales - 60% 120,000 150,000 187,500 457,500 Answer b Schedule of Expected Cash Collections from Sales Oct Nov Dec Total Cash Sales 80,000 100,000 125,000 305,000 Collection from Accounts Receivables Oct Sales - 120,000 120,000 Nov Sales 150,000 150,000 Dec Sales - Total cash Collections 80,000 220,000 275,000 575,000 Answer c Merchandise Purchase Budget Oct Nov Dec Total Cost of Goods Sold - 60% of Sales 120,000 150,000 187,500 457,500 Add: Closing Inventory 15,000 18,750 12,000 12,000 Total Needs 135,000 168,750 199,500 469,500 Less: opening Inventory - (15,000) (18,750) - Required Purchases 135,000 153,750 180,750 469,500 Answer d Schedule of Cash payments to Suppliers Oct Nov Dec Total Cash Payment Oct Purchases 94,500 40,500 135,000 Nov Purchases 107,625 46,125 153,750 Dec Purchases 126,525 126,525 Total Cash Payment to Suppliers 94,500 148,125 172,650 415,275 Answer e Selling & Admn. Expense Budget Oct Nov Dec Total Salaries & Wages 18,000 18,000 18,000 54,000 Sales Commision - 5% of Sales 10,000 12,500 15,625 38,125 Supplies Expense - 2% of Sales 4,000 5,000 6,250 15,250 Utlities 1,400 1,400 1,400 4,200 Depreciation on Store Fixture 4,000 4,000 4,000 12,000 Rent 4,800 4,800 4,800 14,400 Miscellaneous 1,200 1,200 1,200 3,600 - Total 43,400 46,900 51,275 141,575 Answer f. Schedule of Cash payments of Selling & Admn. Budget Oct Nov Dec Total Salaries & Wages 18,000 18,000 18,000 54,000 Sales Commision - 5% of Sales - 10,000 12,500 22,500 Supplies Expense - 2% of Sales 4,000 5,000 6,250 15,250 Utlities - 1,400 1,400 2,800 Rent 4,800 4,800 4,800 14,400 Miscellaneous 1,200 1,200 1,200 3,600 - Total 28,000 40,400 44,150 112,550 Cash budget Oct Nov Dec Total Opening cash Balance - 12,500 12,785 - Add: receipts Collection from Customers 80,000 220,000 275,000 575,000 Total Cash available 80,000 232,500 287,785 575,000 Less: Disbursements Inventory Purchases 94,500 148,125 172,650 415,275 Selling & Admn. Exp. 28,000 40,400 44,150 112,550 Purchase of Store Fixtures 164,000 - - 164,000 Total Disbursement 286,500 188,525 216,800 691,825 Excess (deficiency) of Cash (206,500) 43,975 70,985 (116,825) Add: Finance from Bank 219,000 219,000 Less: Payment to Bank - (29,000) (57,000) (86,000) Less: Payment of interet - Bank loan - (2,190) (1,900) (4,090) Total Financing 219,000 (31,190) (58,900) 128,910 Net Cash Balance Closing 12,500 12,785 12,085 12,085 Assuming Loan Taken on the Last Day of Month Income Statement For the Qtr Ending Dec 31 Sales 762,500 Cost of Goods Sold - 60% 457,500 Gross Margin 305,000 Less: Selling & Admn. Exp. Salaries & Wages 54,000 Sales Commision - 5% of Sales 38,125 Supplies Expense - 2% of Sales 15,250 Utlities 4,200 Depreciation on Store Fixture 12,000 Rent 14,400 Miscellaneous 3,600 141,575 Operating Profit 163,425 Less: Interest Expenses 4,090 Net Income 159,335 Balance Sheet As on Dec 31 Assets Current Assets Cash 12,085 Accounts receivables 187,500 Inventory 12,000 211,585 Fixed Assets Store Fixtures - Add: Purchases 164,000 Less: Dep. (12,000) 152,000 Total Assets 363,585 Liabilities Accounts Payable 54,225 Line of Credit 133,000 Sales Comm. Payable 15,625 Utilities Payable 1,400 204,250 Total liabilities 204,250 Shareholders's Equity Retained Earnings 159,335 Total Stockholders equity 159,335 Total liabilities & Stockholders' Equity 363,585 - Schedule of Retained Earnings As on Mar 31 Opening Balance - Add: net income 159,335 Less: Dividend declared - Closing Balance 159,335 Adams Company Statement of Cash Flows (Indirect Method) For the Year ended Dec 31, 2019 Cash Flow from opearating activities: Net Income 159,335.00 Add/(Less) non cash effects on operating activities Depreciation expense 12,000.00 Inrease in Accounts Receivables (187,500.00) Inrease in Inventory (12,000.00) Increase in Accounts Payable 54,225.00 Increase in Sales Comm. Payable 15,625.00 Increase in Utilities Payable 1,400.00 (116,250.00) Net Cash used by operating activities 43,085.00 Cash flow from Investing Activities Purchase of Store Fixtures (164,000.00) Net Cash used by Investing activities (164,000.00) Cash Flow from Financing Activities Bank Borrowing 219,000.00 Bank Laon paid (86,000.00) Net Cash provided by Financing activities 133,000.00 Net Increase / (Decrease) in Cash 12,085.00 Cash balance at the Dec 31, 2018 - Cash balance at the end - Dec 31, 2016 12,085.00
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.