[nomatter49]

Professor said she might put something like this on our exam this coming Saturday, and that's tomorrow in my time zone. I don't trust my answers. Please check if my work is correct. Thank you very much!

Balance Sheet as of March 31, 200X the start of operations.
Cash…$9,000
Accounts Receivable…48,000
Inventory…12,600
PPE (net)… 200,000
TOTAL ASSETS…$269,600
Interest Payable…$-0-
Notes Payable…$-0-
Accounts Payable…18,300
Capital Stock…180,000
Retained Earnings…71,300
TOTAL LIABILITIES & EQUITIES…$269,600

Budget Figures
Budget Expenses (per month)
Salaries and Wages…$7,500
Freight Out as a % of Sales…6%
Advertising…$6,000
Depreciation…2,000
Other Expense as a % of sales…4%
Minimum Inventory Policy as a % of next month's COS…30%

Budgeted Sales:
March (Actual)…$60,000
March (Budget)…65,000
April…70,000
May…85,000
June…90,000
July…50,000
Required Minimum Cash Balance…$8,000

Sales Mix – cash/credit
Cash Sales…20%
Credit Sales (collected the ff month)…80%
Gross Profit Rate…40%
Assume no interest for cash loans, if any
Inventory paid for in
Month purchase…50%
Month after purchase…50%
Additional data for the Cash Budget:
April - Equipment Purchase…$19,750 (DEPRECIATION IS SET UP A QUARTER AFTER PURCHASE)
June – Dividends Paid…$4,000

Requirements:
1.Prepare a Master Budget for the months of APRIL, MAY, and JUNE. Use March actual figures as the starting point of your budget.
2. Prepare Purchases Budget and Cash Disbursement for Purchases using BUDGETED FIGURES.

My Answers:
SALES BUDGET
(Amounts are for APRIL, MAY, and JUNE respectively.)
Cash Sales……$14,000…$17,000…$18,000
Credit Sales….. $56,000…$68,000…$72,000
Total Sales……$70,000…$85,000…$90,000

COLLECTION BUDGET
Cash Sales…………………….$14,000…$17,000… $18,000
Collection from Prior Month….. $48,000…$56,000…$68,000
Total Collection……………….. $62,000…$73,000…$86,000

PURCHASES BUDGET
Desired Ending Inventory….$15,300…$16,200…$9,000
Cost of Goods Sold…………$42,000…$51,000…$54,000
Total Needed……………….. $57,300…$67,200…$63,000
Beginning Inventory……….. $12,600…$15,300…$16,200
Total Purchases…………….$44,700…$51,900…$46,8 00

CASH DISBURSEMENT FOR PURCHASES
For March…………….. $18,900…$00,000…$00,000
For April……………….$22,350…$22,350…$0,000
For May……………... $00,000…$25,950…$25,950
For June……………... $00,000…$00,000…$23,400
Total Disbursements... $41,250…$48,300…$49,350

OPERATING EXPENSES
Cash Expenses:
Salaries and Wages…….$7,500.. …$7,500……$7,500
Freight Out……………….$4,200….. $5,100.. …$5,400
Advertising……………... $6,000.. …$6,000.. …$6,000
Other Expenses…………$2,800.. …$3,400.. …$3,600
Total Cash Expenses….$20,500…$22,000…$22,500

Non-Cash: Depreciation.. $2,000…$2,000…$2,000
Total Expenses……….$22,500…$24,000…$24,500

CASH BUDGET
Beginning Cash Balance:
Cash Collection…….$62,000…$73,000…$86,000
Total Cash Available... $9,000.…$8,000.. …$8,000

Cash Disbursements:
Inventory Purchases……... $44,700…$51,900…$46,800
Operating Expenses... $20,500…$22,000…$22,500
Equipment Purchase……... $19,750…$00,000…$00,000
Dividends……………….. ….$000……….$000……$4,000
Total Cash Disbursements.. $84,950…$73,900…$73,300

Minimum Cash Balance…….$8,000…$8,000…$8,000
Total Cash Needed………... $23,950…$8,900…$00,000
Cash Excess (Deficit) …….($13,950)…$7,900…$28,700

Financing (Addtl Data: Anything in Excess to be used as a repayment of loan)
Borrowing…………………... …... $21,950…$900…($16,700)
Repayment………………... …….$00,000…$000…$00,000
Total Cash From Financing…….$21,950…$900…$00,000

CASH BALANCE, END………….. $8,000.. $8,000….$8,000

INCOME STATEMENT (Amounts are for April, May, and June respectively)
Sales…$70,000…$85,000…$90,000
Cost of Goods Sold…$42,000…$51,000…$54,000
Gross Profit…$28,000…$34,000…$36,000
Operating Expenses…$22,500…$24,000…$24,500
Operating Income…$5,500…$10,000…$11,500
Retained Earnings, beg….$71,300…$76,800…$86,800
Retained Earnings, end….$76,800…$86,800…$98,300
Ignore Income Taxes

BALANCE SHEET
Cash…$8,000…$8,000…$8,000
Accounts Receivable…$56,000…$68,000…$72,000
Inventory…$15,300…$16,200…$9,000
PPE(net)…$19,750…$17,750…$15,750
Total Assets…$99,050…$109,950…$104,750

Notes Payable…$21,950…$900…$6,150
Accounts Payable…$22,350…$25,950…$23,400
Capital Stock…$180,000 all three months
Retained Earnings…$76,800…$86,800…$98,300
Total Liabilities and Equities…$301,100…$293,650…$307,850

SOLUTION IN REQUIREMENT TO USE BUDGETED FIGURES:
AMOUNTS ARE FOR APRIL, MAY, AND JUNE RESPECTIVELY.
PURCHASES BUDGET
Desired Ending Inventory$15,300…$16,200…$9,000
Cost of Goods Sold$42,000…$51,000…$54,000
Total Needed$57,300…$67,200…$63,000
Beginning Inventory$12,600…$15,300…$16,200
Total Purchases$44,700…$51,900…$46,800

CASH DISBURSEMENT FOR PURCHASES
Total Disbursements:
For April…$42,300
For May…$48,300
For June…$49,350

[Just Looking]

Sales budget is right.

Collection budget is right.

Purchases budget is right.

Cash disbursements for purchases - May and June are correct. I'm coming up slightly different for April =(.5*60000*.6)+(.5*44700)

I need to take a break for a while. I'll be back later to check the rest.

[Just Looking]

Operating expenses are right.

Cash budget - You are using your Purchases budget for "inventory purchases" numbers, but when looking at cash flow you want your "Cash Disbursements for Purchases" numbers as shown above, with April possibly needing adjustment as stated in my other post. For example, in May you are using $51,900 instead of $48,300.

Take a look at that and correct your cash numbers. Also I noticed that your April cash needed is off by $2000 even using your number of $44,700. Oh, just noticed that it's okay in the financing part. I'm thinking you picked up depreciation and then corrected it in the financing part.


I didn't check the rest due to the things that need to be fixed. You seem to have a good handle on this. If you want to correct the above and repost I'll take a look at it, but if you feel confident now that's fine.

[nomatter49]

Thank you for taking time to correct my work! :) But I'm having trouble solving for (.5*60000*.6) = 18,000 which I suppose is the March inventory paid for in April. I got 18,900 or 50% of March total purchases, $37,800.

Purchases Budget for March:
Desired Ending Inventory (30%of April Cost of Sales 42,000) $12,600
Cost of Goods Sold (60% of Sales 60,000*.6)... 36,000
Beg. Inventory (or last month's end. Inventory 36,000*30%)... (10,800)
Total Purchases... $37,800
March purchases paid for in April (37,800*50%)... $18,900

[Just Looking]

I'm sorry. You are right. I got off track somewhere. You have this down quite well.

[nomatter49]

Thank you! Well, I compared my work with my seatmate's and she explained to me that I should have used the March's accounts payable balance for April inventory payments. But she was also having trouble answering this budget problem, so she wasn't able to explain everything. Worst, I arrived at school late and this was the exact problem my prof gave us on the exam. Sigh :|