In: Accounting
Use the following information for Questions 1-7, which will appear on pages 2 and 3 of this exam.
You will use the information to prepare elements of the ABC Company Budget for the 4th quarter (October, November, and December) of 2018.
The following balances were taken from the ABC Company’s balance sheet on September 30, 2018:
Cash 25,000
Accounts Receivable 90,000
Inventory 30,000
Accounts Payable 54,000
The following information is also available and pertaining to ABC Company:
ABC sells one product that is priced at $10/unit. Sales for the months of October and November are expected to be 10,000 units, sales for December are expected to be 12,000 units, and sales for January are expected to be 9,000 units.
The company possessed 5,000 units of inventory as of September 30, 2018. They are required to have 50% of the following month’s projected sales available as an ending inventory. They purchase their inventory for $6/unit.
ABC pays their sales representatives a commission of 7.5% of sales. They pay their sales supervisors $3,000 per month. All salaries are paid in cash in the same month.
ABC’s cash-based general and administrative expenses are $4,000 per month, and are all paid in cash in the same month. ABC has a depreciation expense of $250/month.
All sales are on credit, and all accounts receivable are collected in full during the month following the sale.
All purchases of inventory are on credit, and all accounts payable are paid in full during the month following the purchase.
The minimum cash balance that ABC’s corporate policy requires is $10,000. If the monthly ending balance is below that amount, ABC must initiate a borrowing that requires a 1% monthly interest payment. As of September 30, there is no active borrowing. Excess cash balances above the minimum are to be used to repay active borrowings, if applicable.
Prepare the General and Administrative Expense Budget for the 4th quarter of 2018.
General & Administrative Expense Budget : Quarter 4 |
|||||
Working |
October |
November |
December |
Total Quarter 4 |
|
A |
Cash based expenses |
$ 4,000.00 |
$ 4,000.00 |
$ 4,000.00 |
$ 12,000.00 |
B |
Depreciation expenses |
$ 250.00 |
$ 250.00 |
$ 250.00 |
$ 750.00 |
C = A+B |
Total Budgeted General & Admin expense for Quarter 4 |
$ 4,250.00 |
$ 4,250.00 |
$ 4,250.00 |
$ 12,750.00 |