Problem 8-29: Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10]
Current assets as of March 31:
Cash: $9,400
Accounts receivable: $27,600
Inventory: $51,000
Property, plant, and equipment, net: $99,600
Accounts payable: $30,675
Common stock: $150,000
Retained earnings: $6,925
a. The gross margin is 25% of sales.
b. Actual and budgeted sales data:
March (actual): $69,000
April: $85,000
May: $90,000
June: $115,000
July: $66,000
c. Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales.
d. Each month's ending inventory should equal 80% of the following month's budgeted cost of goods sold.
e. The accounts payable at March 31 are the result of March purchases of inventory.
f. Monthly expenses are as follows: commissions (12% of sales), rent ($4,200 per month), and other expenses (excluding depreciation on new assets). Equipment costing $3,400 will be purchased for cash in April.
g. Management would like to maintain a minimum cash balance of at least $4,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the end of each month. The interest rate is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.
Required: Using the preceding data:
1. Complete the following schedule:
2. Complete the following:
3. Complete the following cash budget:
4. Prepare an absorption costing income statement for the quarter ended June 30.
5. Prepare a balance sheet as of June 30.
