Balance Sheet as of 31 December 2019
Current Assets:
Cash $8,000
Accounts Receivable $42,000
Inventory $10,200
Building and Equipment, Net* $136,000
Total Assets $196,200
Current Liabilities:
Accounts Payable $30,200
Common Shares $120,000
Retained Earnings $46,000
Total Liabilities & Owner's Equity $196,200
The gross margin for the company is 40% of sales.
b. Actual and budgeted sales data are as follows:
December (Actual) January February March April
$80,000 $69,000 $99,000 $74,000 $70,000
Sales are 30% in cash and 70% in credit. Credit sales are collected in the month following the sale.
d. Each month's ending inventory should be 25% of the following month's budgeted cost of goods sold.
c. 30% of the month's inventory purchases are paid for in the month of purchase; the remaining 70% is paid for in the following month.
Monthly expenses are as follows: salaries $10,000; rent $6,000; advertisements $2,000; other expenses (excluding depreciation) 12% of sales.
Depreciation is $3,200 for the quarter and includes depreciation on new assets acquired during the quarter.
Equipment will be acquired for cash: $4,000 in January and $6,000 in March.
h. Management would like to maintain a minimum cash balance of $6,000 at the end of each month. Assume the company can borrow at 0% interest and they do not pay any income tax. All borrowing occurs at the beginning of a month. The company will, as far as it is able, repay outstanding loans at the end of each month.
Question 2: Prepare the following budgets for each of the first three months of 2020. [20 Marks]
- Schedule of Expected Cash Collection
- Merchandise Purchase Budget
- Schedule of Cash Disbursement for Purchase
- Schedule of Cash Disbursement for S & A expenses
- Cash Budget
Question 2: Prepare a budgeted income statement for the first three months of 2020 and a budgeted balance sheet as of March 31, 2020 [10 Marks]
