Provide a supporting schedule of cash collections.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Bernard Creighton is the controller for Creighton Hardware Store. In putting
together the
the following data.
a. Sales
July (Actual) $100.000
August (Actual) 120.000
September (Estimated) 90.000
October (Estimated) 100.000
November (Estimated) 135.000
December (Estimated) 150.000
b. Each month, 20 percent of sales are for cash, and 80 percent are on
credit. The collection pattern for credit sales is 20 percent in the month
of sale, 50 percent in the following month, and 30 percent in the second
month following the sale.
c. Each month, the ending inventory exactly equals 40 percent of the cost
of next month's sales. The markup on goods is 33.33 percent of cost.
d. Inventory purchases are paid for in the month following purchase.
e. Recurring monthly expenses are as follows:
Salaries & Wages $10.000
Utilities 1.000
Other 1.700
f. Property taxes of $15,000 are due and payable on September 15.
g. Advertising fees of $6,000 must be paid on October 20.
h. A lease on a new storage facility is scheduled to begin on November 2.
Monthly payments are $5,000.
i. The company has a policy to maintain a minimum cash balance of
$10,000. If necessary, it will borrow to meet its short-term needs. All
borrowing is done at the beginning of the month. All payments on
principal and interest are made at the end of the month. The annual
interest rate is 9 percent. The company must borrow in multiples of
$1,000.
j. A completed balance sheet as of August 31 is given below.
(Accounts payable is for inventory purchases only.)
Assets Liabilities&Owners' Equity
Cash $10.200
Inventory $27.000
Plant & Equipment $ 431.750
Account Payable $ 81.000
Common Stocks $ 220.000
Total $569.750 $569.750
Required:
1). Provide a supporting schedule of cash collections.
2). Prepare a pro forma balance sheet as of November 30.
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