In: Accounting
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Near the end of 2015, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2015. |
DIMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2015 |
|||||
Assets | |||||
Cash | $ | 36,000 | |||
Accounts receivable | 520,000 | ||||
Inventory | 110,000 | ||||
Total current assets | $ | 666,000 | |||
Equipment | $ | 528,000 | |||
Less accumulated depreciation | 66,000 | ||||
Equipment, net | 462,000 | ||||
Total assets | $ | 1,128,000 | |||
Liabilities and Equity | |||||
Accounts payable | $ | 375,000 | |||
Bank loan payable | 15,000 | ||||
Taxes payable (due 3/15/2016) | 90,000 | ||||
Total liabilities | $ | 480,000 | |||
Common stock | 474,000 | ||||
Retained earnings | 174,000 | ||||
Total stockholders’ equity | 648,000 | ||||
Total liabilities and equity | $ | 1,128,000 | |||
To prepare a master budget for January, February, and March of 2016, management gathers the following information. |
a. |
Dimsdale Sports’ single product is purchased for $20 per unit and resold for $54 per unit. The expected inventory level of 5,500 units on December 31, 2015, is more than management’s desired level for 2016, which is 20% of the next month’s expected sales (in units). Expected sales are: January, 7,250 units; February, 9,500 units; March, 10,750 units; and April, 10,500 units. |
b. |
Cash sales and credit sales represent 25% and 75%, respectively, of total sales. Of the credit sales, 61% is collected in the first month after the month of sale and 39% in the second month after the month of sale. For the December 31, 2015, accounts receivable balance, $125,000 is collected in January and the remaining $395,000 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, 2015, accounts payable balance, $80,000 is paid in January and the remaining $295,000 is paid in February. |
d. |
Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $78,000 per year. |
e. |
General and administrative salaries are $144,000 per year. Maintenance expense equals $2,200 per month and is paid in cash. |
f. |
Equipment reported in the December 31, 2015, balance sheet was purchased in January 2015. It is being depreciated over eight years under the straight-line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter: January, $38,400; February, $96,000; and March, $28,800. This equipment will be depreciated under the straight-line method over eight years with no salvage 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 $175,000, which will be paid with cash on the last day of the month. |
h. |
Dimsdale 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 $26,325 in each month. |
i. |
The income tax rate for the company is 39%. Income taxes 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 2016; include the following component budgets: |
5.
value:
15.00 points
Required information
5. | Monthly capital expenditures budgets. |
References
eBook & Resources
Expanded tableDifficulty: 3 HardLearning Objective: 22-P4 Appendix-Prepare each component of a master budget and link each to the budgeting process-for a merchandising company.
Check my work
6.
value:
15.00 points
Required information
6. |
Monthly cash budgets. |
References
eBook & Resources
Expanded tableDifficulty: 3 HardLearning Objective: 22-P4 Appendix-Prepare each component of a master budget and link each to the budgeting process-for a merchandising company.
Check my work
7.
value:
15.00 points
Required information
7. |
Budgeted income statement for the entire first quarter (not for each month). |
References
eBook & Resources
Expanded tableDifficulty: 3 HardLearning Objective: 22-P4 Appendix-Prepare each component of a master budget and link each to the budgeting process-for a merchandising company.
Check my work
8.
value:
15.00 points
Required information
8. |
Budgeted balance sheet as of March 31, 2016. |
References
eBook & Resources
Expanded table
Master budget for First quarter | ||||
Items | January | February | March | Quarter |
Budgeted sales in units | 7250 | 9500 | 10750 | 27500 |
Budgeted sales price per unit | $54 | $54 | $54 | $54 |
Sales revenue | $391,500 | $513,000 | $580,500 | $1,485,000 |
Cash Sales | $97,875 | $128,250 | $145,125 | $371,250 |
Credit Sales | $293,625 | $384,750 | $435,375 | $1,113,750 |
Cash collection for credit sales for Dec | $125,000 | $395,000 | $520,000 | |
Cash collection for credit sales for Jan | $179,111 | $114,514 | $293,625 | |
Cash collection for credit sales for feb | $234,698 | $234,698 | ||
Total Cash Reciepts | $222,875 | $702,361 | $494,336 | $1,419,573 |
Budgeted sales in units | 7250 | 9500 | 10750 | 27500 |
Add: Ending Inventory (20%) | 1900 | 2150 | 2100 | 2100 |
Less: Beginning Inventory | 5500 | 1900 | 2150 | 5500 |
Budgeted purchase units | 3650 | 9750 | 10700 | 24100 |
Purchase price per unit | $20 | $20 | $20 | $20 |
Purchase cost | $73,000 | $195,000 | $214,000 | $482,000 |
Cash paid for mechandise of Dec | $80,000 | $295,000 | $375,000 | |
Cash paid for mechandise of Jan | $14,600 | $58,400 | $73,000 | |
Cash paid for mechandise of Feb | $39,000 | $39,000 | ||
Cash paid for invontory | $80,000 | $309,600 | $97,400 | $487,000 |
Sales commission | $78,300 | $102,600 | $116,100 | $297,000 |
Sales Salaries | $6,500 | $6,500 | $6,500 | $19,500 |
General and administrative salaries | $12,000 | $12,000 | $12,000 | $36,000 |
Maintenance expenses | $2,200 | $2,200 | $2,200 | $6,600 |
Taxes paid | $90,000 | |||
Total cash disbursement | $179,000 | $432,900 | $324,200 | $936,100 |
Capital Expenditure | ||||
New equipment purchase | $38,400 | $96,000 | $28,800 | $163,200 |
New land purchase | $175,000 | $175,000 | ||
Total Capital expenditure | $38,400 | $96,000 | $203,800 | $338,200 |
Total Cash Outflow | $217,400 | $528,900 | $528,000 | $1,274,300 |
Net cash inflow | $5,475 | $173,461 | ($33,664) | $145,273 |
Minimum balance requirement | $26,325 | $26,325 | $26,325 | $26,325 |
Beginning Cash Balance | $36,000 | $26,325 | $199,786 | $36,000 |
Cash inflow | $5,475 | $173,461 | ($33,664) | $145,272 |
Additional loan required | ||||
Loan repaid | $15,000 | $15,000 | ||
Interest paid | $150 | $150 | ||
Ending Cash Balance | $26,325 | $199,786 | $166,122 | $166,122 |