Schedule of Expected Cash Collections Schedule of Expected Cash Disbursements -

Question

Schedule of Expected Cash Collections

Schedule of Expected Cash Disbursements -

Merchandise Purchases Schedule of Expected Cash Disbursements -

Operating Expenses Combined Cash Budget

Budgeted Balance Sheet

Bobcat Boutique is a merchandising business located downtown in San Marcos, Texas. The owners are Texas State alumni and they would like to maximize their profits. They understand that accurate budgeting will help obtain this goal. The company is completing its second year of operations and is preparing to build its master budget for the second quarter. The budget will detail each quarter’s activity and the total for the quarter.

The master budget will be based on the following information:

Sales were budgeted at $50,000 for September.

Expected sales are $60,000 for October,

$72,000 for November, $90,000 for December,

$48,000 for January.

The gross margin is 25% of sales. Sales are projected to be 60% for cash and 40% on credit.

Credit sales are collected in the month following the sale. The September accounts receivable are a result of the September credit sales. There are no bad debts.

Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold. Merchandise Inventory Purchases are paid as follows; 50% of a month’s inventory purchases is paid for in the month of purchase; the other 50% is paid for in the following month.

The accounts payable at September 31 are the result of September purchases of inventory. Monthly operating expenses are as follows: commissions are 12% of sales; rent is $2,500 per month, other operating expenses (excluding depreciation) are 6% of sales. Assume these expenses are paid monthly. Deprecation is $900 per month.

Equipment costing $1,500 will be purchased for cash in October.

Income tax is estimated to be 28% of operating income. Estimated taxes are accrued each month and paid in cash in the last month of the quarter.

Management would like to maintain a minimum cash balance of at least $3,000 at the end of each month. The boutique has an agreement with a local bank that allows them 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. They would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter. T

he balance sheet as of September 31, is as follows:

Assets September 31

Cash $8,000

Accounts Receivable 20,000

Inventory 36,000

Plant & Equipment,

net 120,000

Total assets $184,000

Liabilities & Equity Accounts Payable $21,750

Retained Earnings 162,250

Total liabilities & equity $184,000

October   November   December   Total   Collections of: Cash Sales Credit Sales Total Collections Payments of: Current Month Purchases Prior Month Purchases Total Payments - Merchandise Inventory Purchases Commissions Rent Other Operating Expenses Total Payments - Operating Expenses Beginning Cash Balance Cash Collections Cash Available Cash Payments: Merchandise Inventory Purchases Operating Expenses Equipment Purchase Income Taxes Ending Cash Balance before Financing New Borrowings Debt Repayments Interest Payments Ending Cash Balance after Financing Cash Accounts Receivable Inventory Plant & Equipment, net Total assets Accounts Payable Retained Earnings Total liabilities & equity

Explanation / Answer

Schedule of Expected Cash Collections Oct Nov Dec Quarter Jan Total sales T 60000 72000 90000 222000 48000 Cash Sales (60% for cash) S 36000 43200 54000 133200 Credit Sales (T-S) 20000 24000 28800 72800 Total Collections 56000 67200 82800 206000 Merchandise Purchases Budget Oct Nov Dec Quarter Jan Budgeted Cost of Goods Sold (75%*sales) $45,000 $54,000 $67,500 $1,66,500 $36,000 Add Desired Ending Inventory (80%*next COGS $43,200 $54,000 $28,800.0 $28,800.0 Total Needs $88,200 $1,08,000 $96,300 $1,95,300 Less Beginning Inventory $36,000 $43,200 $54,000 $36,000 Required Purcahses $52,200 $64,800 $42,300 $1,59,300 Schedule of Expected Cash Disbursements- Merchandise Purchases (50% in same month and 50% in next month) Oct Nov Dec Quarter Jan Sep Purchases $21,750 $21,750 Oct Purchases $26,100 $26,100 $52,200 Nov Purchases $32,400 $32,400 $64,800 Dec Purchases $21,150 $21,150 Total Disbursements $47,850 $58,500 $53,550 $1,59,900 Cash Budget April May June Quarter Beginnning Cash Balance 8,000 $3,350 $3,590 8,000 Add Cash Collections 56,000 67,200 82,800 2,06,000 Total Cash Avail 64,000 70,550 86,390 2,14,000 Less Cash Disbursements For Inventory $47,850 $58,500 $53,550 $1,59,900 For Expenses 13300 15460 18700 47460 For Incoem tax expens 1439 1439 For Equipment 1500 1500 Total Cash Disbursements $62,650 $73,960 $73,689 $2,10,299 Excess(Deficiency) of Cash $1,350 ($3,410) $12,701 $3,701 Financing: Borrowings: 2000 7000 9000 Repayments: -9000 -9000 Interest: -200 -200 Total Financing 2000 7000 -9200 -200 Ending Cash Balance $3,350 $3,590 $3,501 $3,501 Interet: (3000*3%)+(7000*2%) working Expenses April May June Quarter Comissiion (12%*sales) 7200 8640 10800 26640 Rent 2500 2500 2500 7500 Other expenses (6%*sales) 3600 4320 5400 13320 Total cash expenses 13300 15460 18700 47460 Income statement sales 222000 Less;: Cost of Good sold $1,66,500 Gross profit $55,500 Less: S & A exp Commission 26640 Rent 7500 Depreciation (900*3) 2700 Other expenses 13320 Total S & A exp 50160 Net operating income $5,340 Interest exp 200 Profit before tax $5,140 Incoem atx expense 1439 Net Income $3,701 Balance sheet Current assets Cash 3,501 Accounts receivable 36,000 Inventory 28,800 Total Current assets 68,301 Building and equipment, net (120000+1500-2700) 118800 Total assets 1,87,101 Liabilities & stockholder equity Current liabilities Accounts payable 21,150 stockholder equity Retained earnings $1,65,951 Totl stockholder equity $1,65,951 Total Liabilities & stockholder equity $1,87,101

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