Question

Baird 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:

Problem 14-23 Part 1

Required

October sales are estimated to be $300,000, 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.

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.

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 $12,100. Assume that all purchases are made on account. Prepare an inventory purchases budget.

The company pays 80 percent of accounts payable in the month of purchase and the remaining 20 percent in the following month. Prepare a cash payments budget for inventory purchases.

Budgeted selling and administrative expenses per month follow:

Salary expense (fixed)	$	18,100
Sales commissions		4	% of Sales
Supplies expense		2	% of Sales
Utilities (fixed)	$	1,500
Depreciation on store fixtures (fixed)*	$	4,100
Rent (fixed)	$	4,900
Miscellaneous (fixed)	$	1,300

*The capital expenditures budget indicates that Baird will spend $119,400 on October 1 for store fixtures, which are expected to have a $21,000 salvage value and a two-year (24-month) useful life.

Use this information to prepare a selling and administrative expenses budget.

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.

Baird 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 $13,000 cash cushion. Prepare a cash budget.                                                            

Baird 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 $13,000 cash cushion. Prepare a cash budget. (Any repayments/shortage which should be indicated with a minus sign.)

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Cash Budget October November December Beginning cash balanceselected answer correct $53,000selected answer incorrect $(286,436) Add: Cash receiptsselected answer correct 120,000selected answer correct 264,000selected answer incorrect 316,800selected answer incorrect Cash available 173,000 264,000 30,364 Less: Payments For inventory purchasesselected answer correct 127,680selected answer incorrect 225,456selected answer incorrect 329,008selected answer incorrect For selling and administrative expensesselected answer correct 30,300selected answer correct 45,000selected answer correct 48,840selected answer correct Purchase of store fixturesselected answer correct 119,400selected answer correct not attempted not attempted not attempted 277,380selected answer incorrect 270,456selected answer incorrect 377,848selected answer incorrect Borrowing (repayment)selected answer incorrect (104,308)selected answer incorrect 7,164selected answer incorrect (47,244)selected answer incorrect Total budgeted payments 450,452 548,076 708,452 Payments minus receipts not attempted (277,452) (284,076) (678,088) Financing activity Interest expenseselected answer incorrect not attempted (2,360)selected answer incorrect (11,360)selected answer incorrect Ending cash balanceselected answer correct $(277,452) $(286,436) $(689,448)

                 

The company pays 80 percent of accounts payable in the month of purchase and the remaining 20 percent in the following month. Prepare a cash payments budget for inventory purchases. (Round your final answers to the nearest whole dollar amounts.)

October November December Schedule of Cash Payments Budget for Inventory Purchases Payment of current month's accounts payable $264,000selected answer incorrect $262,080selected answer incorrect $254,020selected answer incorrect Payment for prior month's accounts payable not attempted 31,920selected answer incorrect 48,384selected answer incorrect Total budgeted payments for inventory $264,000 $294,000 $302,404

Answer 1

Sales Budget	Oct	Nov	Dec
Total sales	300000	360000	432000
Cash Sales (40% for cash) S	120000	144000	172800
Credit Sales (T-S)	180000	216000	259200
Total sales	300000	360000	432000
Schedule of Expected Cash Collections
	Oct	Nov	Dec
Curent cash sales	120000	144000	172800
Add: collection fom AR	0	180000	216000
Total Collectios	120000	324000	388800
Inventory Purchases Budget
	Oct	Nov	Dec
Budgeted Cost of Goods Sold (70%*sales)	$210,000	$252,000	$302,400
Add Desired Ending Inventory (20%*next COGS	$50,400	$60,480	$12,100.0
Total Needs	$260,400	$312,480	$314,500
Less Beginning Inventory	$0	$50,400	$60,480
Required Purcahses	$260,400	$262,080	$254,020
Schedule of Expected Cash Disbursements- Merchandise Purchases
	Oct	Nov	Dec
Payment in curent month (80%)	$208,320	$209,664	$203,216
Payment in prior month (20% of prior month)\	$0	$52,080	$52,416
Total Disbursements	$208,320	$261,744	$255,632
Selling & Administrative Budget
	Oct	Nov	Dec
Salary expenses	18100	18100	18100
sales comission (4%)	12000	14400	17280
Supplies expenses (2%)	6000	7200	8640
Utilities	1500	1500	1500
Depeciation	4100	4100	4100
rent	4900	4900	4900
Mis	1300	1300	1300
Total S& A expenses	47900	51500	55820
Schedule of Cash paymnet of Selling & Administrative Budget
	Oct	Nov	Dec
Salary expenses	18100	18100	18100
sales comission (5%)	0	12000	14400
Supplies expenses (2%)	6000	7200	8640
Utilities	0	1500	1500
rent	4900	4900	4900
Mis	1300	1300	1300
Cash payment S& A expenses	30300	45000	48840
Cash Budget
	Oct	Nov	Dec
Beginnning Cash Balance	0	$13,980	$13,000
Add Cash Collections	120,000	324,000	388,800
Total Cash Available	120,000	337,980	401,800
Less Payments
For Inventory Purchases	$208,320	$261,744	$255,632
For S & A Expenses	30300	45000	48840
Purchase of store fixture	119400	0	0
Total Cash Disbursements	$358,020	$306,744	$304,472
Excess(Deficiency) of Cash	($238,020)	$31,236	$97,328
Financing:
Borrowings: (239000+13000)	252000
Repayments:		($13,196)	($79,552)
Interest expenses		-5040	-4776
Total Financing	252000	-18236	-84328
Ending Cash Balance	$13,980	$13,000	$13,000
Interet: oct and nov (252000*2%) Dec (252000-13196)*2%
Repayments: (31236-5040-13000) for Nov	$13,196
(97328-4776-13000) for Dec	$79,552