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Question 3 Partially correct Mark 54.34 out of 98.00 Flag question Edit question Question text Developing...

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Developing a Master Budget
for a Merchandising Organization
Peyton Department Store prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for 2010.

PEYTON DEPARTMENT STORE
Balance Sheet
March 31, 2010
Assets

Liabilities and Stockholders' Equity

Cash $4,000

Accounts payable

$26,000
Accounts receivable 25,000

Dividends payable

17,000
Inventory 30,000

Rent payable

3,000
Prepaid Insurance 2,000

Stockholders' equity

40,000
Fixtures 25,000
Total assets $86,000

Total liabilities and equity

$86,000

Actual and forecasted sales for selected months in 2010 are as follows:

Month Sales Revenue
January $40,000
February 50,000
March 40,000
April 50,000
May 60,000
June 70,000
July 90,000
August 80,000

Monthly operating expenses are as follows:

Wages and salaries $26,000
Depreciation 100
Utilities 1,000
Rent 3,000

Cash dividends of $17,000 are declared during the third month of each quarter and are paid during the first month of the following quarter. Operating expenses, except insurance, rent, and depreciation are paid as incurred. Rent is paid during the following month. The prepaid insurance is for five more months. Cost of goods sold is equal to 50 percent of sales. Ending inventories are sufficient for 120 percent of the next month's sales. Purchases during any given month are paid in full during the following month. All sales are on account, with 50 percent collected during the month of sale, 40 percent during the next month, and 10 percent during the month thereafter. Money can be borrowed and repaid in multiples of $1,000 at an interest rate of 12 percent per year. The company desires a minimum cash balance of $4,000 on the first of each month. At the time the principal is repaid, interest is paid on the portion of principal that is repaid. All borrowing is at the beginning of the month, and all repayment is at the end of the month. Money is never repaid at the end of the month it is borrowed.

  • Part A
  • Part B
  • Part C
  • Part D
  • Part E
  • Part F

(c) Prepare a cash disbursements schedule for each month of the second quarter ending June 30, 2010. Do not include repayments of borrowings.

Peyton Department Store
Schedule of Monthly Cash Disbursements
Quarter Ending June 30, 2010
April May June Total
Total cash disbursements Answer Answer Answer Answer

(d) Prepare a cash budget for each month of the second quarter ending June 30, 2010. Include budgeted borrowings and repayments.

Only use negative signs, if needed, for: excess receipts over disbursements, balance before borrowings and cash balances (beginning and ending).

Peyton Department Store
Monthly Cash Budget
Quarter Ending June 30, 2010
April May June Total
Cash balance, beginning Answer Answer Answer Answer
Receipts Answer Answer Answer Answer
Disbursements Answer Answer Answer Answer
Excess receipts over disb. Answer Answer Answer Answer
Balance before borrowings Answer Answer Answer Answer
Borrowings Answer Answer Answer Answer
Loan repayments Answer Answer Answer Answer
Cash balance, ending Answer Answer Answer Answer

(e) Prepare an income statement for each month of the second quarter ending June 30, 2010.

Only use negative signs to show net losses in income.

Peyton Department Store
Budgeted Monthly Income Statements
Quarter Ending June 30, 2010
April May June Total
Sales Answer Answer Answer Answer
Cost of sales Answer Answer Answer Answer
Gross profit Answer Answer Answer Answer
Operating expenses:
Wages and salaries Answer Answer Answer Answer
Depreciation Answer Answer Answer Answer
Utilities Answer Answer Answer Answer
Rent Answer Answer Answer Answer
Insurance Answer Answer Answer Answer
Interest Answer Answer Answer Answer
Total expenses Answer Answer Answer Answer
Net income Answer Answer Answer Answer

(f) Prepare a budgeted balance sheet as of June 30, 2010.

Peyton Department Store
Budgeted Balance Sheet
June 30, 2010
Assets Liabilities and Equity
Cash Answer Merchandise payable Answer
Accounts receivable Answer Dividend payable Answer
Inventory Answer Rent payable Answer
Prepaid insurance Answer Loans payable Answer
Fixtures Answer Interest payable Answer
Total assets Answer Stockholders' equity Answer
Total liab. & equity Answer

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