Haas Company is a retail company that specializes in selling outdoor camping equ

Question

Haas Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2015. 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.

A-B) October sales are estimated to be $400,000 of which 45 percent will be cash and 55 percent will be credit. The company expects sales to increase at the rate of 20 percent per month. 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.

c.&d. The cost of goods sold is 70 percent of sales. The company desires to maintain a minimum ending inventory equal to 20 percent of the next month’s cost of goods sold. Ending inventory of December is expected to be $13,900. The company pays 80 percent of accounts payable in the month of purchase and the remaining 20 percent in the following month. Assume that all purchases are made on account. Prepare an inventory purchases budget and a cash payments budget for inventory purchases.(Round your answers to the nearest dollar amount.)

e.&f. Budgeted selling and administrative expenses per month follow. Salary expense (fixed) $ 19,900 Sales commissions 4 percent of Sales Supplies expense 2 percent of Sales Utilities (fixed) $ 3,300 Depreciation on store equipment (fixed)* $ 5,900 Rent (fixed) $ 6,700 Miscellaneous (fixed) $ 3,100 * The capital expenditures budget indicates that Haas will spend $180,600 on October 1 for store fixtures, which are expected to have a $39,000 salvage value and a two-year (24-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. Prepare a selling and administrative expenses budget and a cash payments budget for selling and administrative expenses. (Round your answers to the nearest dollar amount.)

g) Haas borrows funds, in increments of $1,000, and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. It pays interest of 2 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $31,000 cash cushion. Prepare a cash budget. (Any repayments/shortage which should be indicated with a minus sign. Round your answers to the nearest dollar amount.)

H) Prepare a pro forma income statement for the quarter. (Round your answers to the nearest dollar amount.)

I) Prepare a pro forma balance sheet at the end of the quarter. (Amounts to be deducted should be

j. Prepare a pro forma statement of cash flows for the quarter. (Amounts to be deducted should be indicated by a minus sign. Round your answers to the nearest dollar amount.)

Explanation / Answer

Question a & b Sales Budget: Month September October Estimated Cash Sales 150000 180000 Estimated Credit Sales 183333.333 220000 Total Sales 333333.333 400000 September sales = 400000/120% Cash Budget: October Cash Sales 180000 Collection on September sales 183333 Total Cash Collection 363333 Question c & d. September October November Cost of Goods Sold 233333 280000 336000 Ending Inventory 56000 67200 Total 289333 347200 Less: Beginning Cost of Goods Sold 46667 56000 Purchase Budget 242667 291200 Cash payment budget September October November September Purchase 194133 58240 October Payment 232960 58240 Total payment 194133 291200 58240

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