Question

.Munoz Company is 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:

A: October sales are estimated to be $340,000, of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 20 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.

C: 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. However, ending inventory of December is expected to be $12,900. 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)	$	18,900
Sales commissions		4	% of Sales
Supplies expense		2	% of Sales
Utilities (fixed)	$	2,300
Depreciation on store fixtures (fixed)*	$	4,900
Rent (fixed)	$	5,700
Miscellaneous (fixed)	$	2,100

*The capital expenditures budget indicates that Munoz will spend $146,600 on October 1 for store fixtures, which are expected to have a $29,000 salvage value and a two-year (24-month) useful life. Use this information to prepare a selling and administrative expenses budget.

F: 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 cash payments budget for selling and administrative expenses.

G: Munoz 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 $21,000 cash cushion. Prepare a cash budget.

A:

	October November December Sales Budget Cash sales Sales on account Total budgeted sales

B:

	October November December Schedule of Cash Receipts Current cash sales Plus collections from A/R Total collections

C:

	October November December Inventory Purchases Budget Inventory needed Required purchases (on account)

D: October November December

Schedule of cash payment budget for inven. purchases:

Payment of current month;s accounts payable:

Payment for prior months accounts payable:

Total budgeted payment for inventory:

Answer 1

A		October	November	December
	Sales Budget:
	Cash sales	136000	163200	195840
	Sales on account	204000	244800	293760
	Total budgeted sales	340000	408000	489600
B		October	November	December
	Schedule of Cash Receipts:
	Current cash sales	136000	163200	195840
	Plus collections from A/R		204000	244800
	Total collections	136000	367200	440640
C		October	November	December
	Inventory Purchases Budget:
	Cost of goods sold	238000	285600	342720
	Plus desired ending inventory	57120	68544	12900
	Inventory needed	295120	354144	355620
	Deduct beginning inventory	0	57120	68544
	Required purchases (on account)	295120	297024	287076
D		October	November	December
	Schedule of cash payment budget for inventory purchases:
	Payment of current month's accounts payable	206584	207917	200953
	Payment of prior month's accounts payable		88536	89107
	Total budgeted payment for inventory	206584	296453	290060

Note: Amounts rounded off to the nearest whole dollar for D.