Question
In: Accounting
The BCJ Company needs a master budget for the three months beginning April 1, 2020. The...
The BCJ Company needs a master budget for the three months beginning April 1, 2020. The company retails widgets. The 2020 budget should be based on the following information. An ending minimum cash balance of $10,000 each month is required. Sales are forecasted at an average selling price of $8 per widget. Merchandise costs are $4 per widget. Currently, the company maintains an ending inventory balance equal to 20% of the next month’s projected cost of goods sold. Purchases during any given month are paid half in the month of purchase and half during the following month. Sales are 20% cash and 80% on credit (payable within 30 days), but experience has shown that 60% of monthly credit sales is collected in the current month, 40% in the next month.
Monthly operating expenses are as follows:
Wages and salaries $15,000
Insurance expired 150
Depreciation 1,200
Utilities 1,000
Advertising 300
Miscellaneous 500
Rent 400 per month+ 10% of monthly sales.
All operating expenses are paid as incurred, except insurance, depreciation, and rent. Rent of $400 is paid at the beginning of each month, and the additional 10% of sales is paid in the month following the sales. The company plans to buy some new equipment for $5,000 cash in June. Cash dividends of $1,500 are to be paid quarterly, beginning April 15. Dividends are declared on the 15th of the last month in the calendar quarter.
BCJ has an established line of credit with its bank, Third Fifth National. Money can be borrowed and repaid in multiples of $1,000, at an interest rate of 6% per annum. Management wants to minimize borrowing and repay rapidly. Interest is computed and paid when the principal is repaid. Assume that borrowing occurs at the beginning and repayments at the end of the months in question. Money is never borrowed at the beginning and repaid at the end of the same month. Compute interest to the nearest dollar.
Balance Sheet
March 31, 2020
Assets Liabilities
Cash $16,300 Accounts payable (inventory) $13,750
Accounts receivable (net) 19,200 Dividends payable 1,500
Inventory 4,000 Rent payable 6,000
Prepaid insurance 1,800 Total 21,250
Land, Building, Equipment (net) 75,000
Stockholders' Equity
Capital stock ($1 par value) 54,400
Retained earnings 40,650
Total assets $116,300 Total Liabilities & Stockholders' Equity $116,300
Recent and forecasted sales:
January $45,000 February $50,000 March $60,000 April $40,000
May $50,000 June $70,000 July $60,000
Required: 1. Prepare a master budget, using Excel, and all supporting schedules (including sales) for the months April, 2020 through June, 2020.
2. Prepare the budgeted Income Statement and Statement of Cash Flows for the quarter ended June 30, 2020 and the budgeted Balance Sheet at June 30, 2020.
Solutions
Expert Solution
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| BCJ | |||||
| Sales Budget | April | May | June | Total | Note |
| Budgeted Sales Revenue | 40,000.00 | 50,000.00 | 70,000.00 | 160,000.00 | C |
| Cash sale is 20% | 8,000.00 | 10,000.00 | 14,000.00 | 32,000.00 | D=C*20% |
| Credit sale is 80% | 32,000.00 | 40,000.00 | 56,000.00 | 128,000.00 | E=C*80% |
| Collection Budget | April | May | June | Total |
| Cash sale | 8,000.00 | 10,000.00 | 14,000.00 | 32,000.00 |
| 60% of Credit sale in the same month | 19,200.00 | 24,000.00 | 33,600.00 | 76,800.00 |
| 40% of Credit sale in the next month | 12,800.00 | 16,000.00 | 28,800.00 | |
| Collection of December 31, 2019 accounts receivable | 19,200.00 | - | - | 19,200.00 |
| Total Scheduled Collections | 46,400.00 | 46,800.00 | 63,600.00 | 156,800.00 |
| Monthly merchandise purchases budget | April | May | June | Total | July | Note |
| Monthly Sales Budget | 40,000.00 | 50,000.00 | 70,000.00 | 160,000.00 | 60,000.00 | C |
| Sell price | 8.00 | 8.00 | 8.00 | 8.00 | A | |
| Monthly Sales units | 5,000.00 | 6,250.00 | 8,750.00 | 20,000.00 | 7,500.00 | B=C/A |
| Add: Closing | 1,250.00 | 1,750.00 | 1,500.00 | 1,500.00 | M= 20% of A of next month. | |
| Less: Opening | 1,000.00 | 1,250.00 | 1,750.00 | 1,000.00 | N= 20% of A of same month. For April its $ 4,000/8. | |
| Material Purchase Budget | 5,250.00 | 6,750.00 | 8,500.00 | 20,500.00 | H |
| Monthly merchandise payment budget | April | May | June | Total | Note |
| Material Purchase Budget | 5,250.00 | 6,750.00 | 8,500.00 | See H | |
| Cost per unit | 4.00 | 4.00 | 4.00 | O | |
| Material cost | 21,000.00 | 27,000.00 | 34,000.00 | 82,000.00 | P=H*O |
| 50% paid in the same month | 10,500.00 | 13,500.00 | 17,000.00 | 41,000.00 | Q= 50% of P |
| 50% paid in the next month | 10,500.00 | 13,500.00 | 24,000.00 | R= 50% of P of previous month | |
| Payment for December 31, 2019 purchases | 13,750.00 | - | 13,750.00 | ||
| Material Payment | 24,250.00 | 24,000.00 | 30,500.00 | 78,750.00 | S |
| Operating expense budget | April | May | June | Total | |
| Wages and salaries | 15,000.00 | 15,000.00 | 15,000.00 | 45,000.00 | |
| Utilities | 1,000.00 | 1,000.00 | 1,000.00 | 3,000.00 | |
| Insurance expired | 150.00 | 150.00 | 150.00 | 450.00 | |
| Advertising | 300.00 | 300.00 | 300.00 | 900.00 | |
| Miscellaneous | 500.00 | 500.00 | 500.00 | 1,500.00 | |
| Rent (Fixed) | 400.00 | 400.00 | 400.00 | 1,200.00 | |
| Rent (Variable) | 4,000.00 | 5,000.00 | 7,000.00 | 16,000.00 | T=C*10% |
| Operating expense budget | 21,350.00 | 22,350.00 | 24,350.00 | 68,050.00 |
| Answer 6- Cash budget | April | May | June | Total |
| Beginning Cash Balance | 16,300.00 | 13,750.00 | 15,350.00 |
&nbs
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