Question

Near the end of 2011, the management of Simid Sports Co., a merchandising company, prepared the following estimated statement of financial position for December 31, 2011.

   

SIMID SPORTS COMPANY Estimated Statement of Financial position December 31, 2011
Assets
Cash				$	35,500
Accounts receivable					520,000
Inventory					150,000
Total current assets					705,500
Equipment	$	544,000
Less accumulated depreciation		68,000			476,000
Total assets				$	1,181,500
Liabilities and Equity
Accounts payable	$	360,000
Bank loan payable		15,000
Tax payable (due 3/15/2012)		92,000
Total liabilities				$	467,000
Share capital—ordinary		473,500
Retained earnings		241,000
Total stockholders’ equity					714,500
Total liabilities and equity				$	1,181,500

To prepare a master budget for January, February, and March of 2012, management gathers the following information.

a.	Simid Sports’ single product is purchased for $30 per unit and resold for $57 per unit. The expected inventory level of 5,000 units on December 31, 2011, is more than management’s desired level for 2012, which is 20% of the next month’s expected sales (in units). Expected sales are: January, 7,250 units; February, 8,750 units; March, 10,500 units; and April, 11,000 units.
b.	Cash sales and credit sales represent 25% and 75%, respectively, of total sales. Of the credit sales, 57% is collected in the first month after the month of sale and 43% in the second month after the month of sale. For the December 31, 2011, accounts receivable balance, $130,000 is collected in January and the remaining $390,000 is collected in February.
c.	Merchandise purchases are paid for as follows: 20% in the first month after the month of purchase and 80% in the second month after the month of purchase. For the December 31, 2011, accounts payable balance, $80,000 is paid in January and the remaining $280,000 is paid in February.
d.	Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $66,000 per year.
e.	General and administrative salaries are $144,000 per year. Maintenance expense equals $2,000 per month and is paid in cash.
f.	Equipment reported in the December 31, 2011, statement of financial position was purchased in January 2011. It is being depreciated over eight years under the straight-line method with no residual value. The following amounts for new equipment purchases are planned in the coming quarter: January, $35,000; February, $96,000; and March, $29,500. This equipment will be depreciated under the straight-line method over eight years with no residual value. A full month’s depreciation is taken for the month in which equipment is purchased.
g.	The company plans to acquire land at the end of March at a cost of $150,000, which will be paid with cash on the last day of the month.
h.	Simid Sports has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and interest is paid at each month-end based on the beginning balance. Partial or full payments on these loans can be made on the last day of the month. The company has agreed to maintain a minimum ending cash balance of $36,513 in each month.
i.	The income tax rate for the company is 43%. Income tax on the first quarter’s income will not be paid until April 15.

  

Required:

Prepare a master budget for each of the first three months of 2012; include the following component budgets:

Monthly capital expenditures budgets. (Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive values. Omit the "$" sign in your response.)

  

SIMID SPORTS CO. Capital Expenditures Budget January, February, and March 2012
	January	February	March
(Click to select)DepreciationPayments for merchandiseSalariesEquipment purchasesMaintenance	$	$	$
(Click to select)Payments for merchandiseSalariesDepreciationMaintenanceLand purchase
Total	$	$	$

6.

Monthly cash budgets. (Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive values except negative preliminary cash balance and repayment of loan to bank which should be indicated by a minus sign. Round your intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

   

SIMID SPORTS CO. Cash Budget January, February, and March 2012
	January	February	March
(Click to select)Sales salariesCash receipts from customersEnding cash balanceDepreciationBeginning cash balance	$	$	$
(Click to select)Payments for merchandiseInterestSales commissionsPurchase of landCash receipts from customers
Total cash available
Cash disbursements
(Click to select)MaintenanceCash receipts from customersBeginning cash balanceDepreciationPayments for merchandise
(Click to select)Cash receipts from customersBeginning cash balanceRepayment of loan to bankSales commissionsDepreciation
(Click to select)Sales salariesDepreciationRepayment of loan to bankBeginning cash balanceCash receipts from customers
(Click to select)Beginning cash balanceGeneral & administrative salariesCash receipts from customersRepayment of loan to bankDepreciation
(Click to select)Beginning cash balanceMaintenance expenseRepayment of loan to bankCash receipts from customersDepreciation
(Click to select)Repayment of loan to bankInterestCash receipts from customersBeginning cash balanceDepreciation
(Click to select)Beginning cash balanceDepreciationRepayment of loan to bankTax payableCash receipts from customers
(Click to select)Repayment of loan to bankBeginning cash balanceCash receipts from customersDepreciationPurchases of equipment
(Click to select)Cash receipts from customersRepayment of loan to bankDepreciationPurchase of landBeginning cash balance
Total cash disbursements
(Click to select)Preliminary cash balanceEnding cash balanceBeginning cash balanceLoan balance, end of monthInterest
(Click to select)Ending cash balanceRepayment of loan to bankLoan balance, end of monthInterestBeginning cash balance
(Click to select)Ending cash balancePreliminary cash balanceInterestBeginning cash balanceRepayment of loan to bank	$	$	$
(Click to select)Beginning cash balanceEnding cash balanceRepayment of loan to bankPreliminary cash balanceLoan balance, end of month	$	$	$

Budgeted income statement for the entire first quarter (not for each month). (Round your answers to the nearest dollar amount. Input all amounts as positive values. Omit the "$" sign in your response.)

8.

Budgeted statement of financial position as at March 31, 2012. (Be sure to list the assets in order of their liquidity. Round your answers to the nearest dollar amount. Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive values. Round your intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

  

Answer 1