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Problem 14-23 Preparing a master budget for retail company with no beginning account balances LO 14-2, 14-3, 14-4, 14-5, 14-6

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Munoz 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:

Required

October sales are estimated to be $340,000, 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 $12,900. Assume that all purchases are made on account. Prepare an inventory purchases budget.

The company pays 70 percent of accounts payable in the month of purchase and the remaining 30 percent in the following month. Prepare a cash payments budget for inventory purchases.

Budgeted selling and administrative expenses per month follow:

Salary expense (fixed)	$	18,900
Sales commissions		4	% of Sales
Supplies expense		2	% of Sales
Utilities (fixed)	$	2,300
Depreciation on store fixtures (fixed)*	$	4,900
Rent (fixed)	$	5,700
Miscellaneous (fixed)	$	2,100

*The capital expenditures budget indicates that Munoz will spend $146,600 on October 1 for store fixtures, which are expected to have a $29,000 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.

Munoz 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 $21,000 cash cushion. Prepare a cash budget.

he company pays 70 percent of accounts payable in the month of purchase and the remaining 30 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 Payment for prior month's accounts payable 0 Total budgeted payments for inventory $0 $0 $0

Answer 1

working	Oct	Nov	Dec	Quarter
Total sales T	340000	408000	489600	1237600
		(340000*140%)	(408000*140%)
Invemtory Purchases Budget
	Oct	Nov	Dec	Quarter
Budgeted Cost of Goods Sold (70%*T)	$238,000	$285,600	$342,720	$866,320
Add Desired Ending Inventory (20%*next COGS)	$57,120	$68,544	$12,900	$12,900.0
Total Needs	$295,120	$354,144	$355,620	$879,220
Less Beginning Inventory	$0	$57,120	$68,544	$0
Required Purcahses	$295,120	$297,024	$287,076	$879,220
answer
	October	November	December	Quarter
Schedule of Cash Payments Budget for Inventory Purchases
Payment of current month's accounts payable	$206,584	$207,917	$200,953	$615,454
	(295120*70%)	(297024*70%)	(287076*70%)
Payment for prior month's accounts payable	$0	$88,536	$89,107.2	$177,643
		(295120*30%)	(297024*30%)
Total budgeted payments for inventory	$206,584	$296,453	$290,060	$793,097
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