Question Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30. The following information is available: Green Sport Balance Sheet March 31 Assets Cash $ 55,000 Accounts receivable 36,000 Inventory 40,000 Buildings and equipment, net of depreciation 100,000 Total assets $231,000 Liabilities and Stockholders’ Equity Accounts payable $ 51,300 Retained earnings 179,700 Total liabilities and stockholders’ equity $231,000 Budgeted Income Statements April May June Sales $100,000 110,000 130,000 Cost of goods sold 60,000 66,000 78,000 Gross margin 40,000 44,000 52,000 Selling and administrative expenses 15,000 16,500 19,500 Net operating income $ 25,000 $ 27,500 $ 32,500 Budgeting Assumptions: 60% of sales are cash sales and 40% of sales are credit sales. Twenty percent of all credit sales are collected in the month of sale and the remaining 80% are collected in the month subsequent to the sale. Budgeted sales for July are $140,000. 10% of merchandise inventory purchases are paid in cash at the time of the purchase. The remaining 90% of purchases are credit purchases. All purchases on credit are paid in the month subsequent to the purchase. Each month’s ending merchandise inventory should equal $10,000 plus 50% of the next month’s cost of goods sold. Depreciation expense is $1,000 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred.
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.
Question
Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30. The following information is available:
Green Sport
|
Assets |
|
|
Cash |
$ 55,000 |
|
|
36,000 |
|
Inventory |
40,000
|
|
Buildings and equipment, net of |
100,000
|
|
Total assets |
$231,000 |
|
Liabilities and |
|
|
Accounts payable |
$ 51,300
|
|
|
179,700 |
|
Total liabilities and stockholders’ equity |
$231,000 |
|
|
April |
May |
June |
|
Sales |
$100,000 |
110,000 |
130,000 |
|
Cost of goods sold |
60,000 |
66,000 |
78,000 |
|
Gross margin |
40,000 |
44,000 |
52,000 |
|
Selling and administrative expenses |
15,000 |
16,500 |
19,500 |
|
Net operating income |
$ 25,000 |
$ 27,500 |
$ 32,500 |
Budgeting Assumptions:
- 60% of sales are cash sales and 40% of sales are credit sales. Twenty percent of all credit sales are collected in the month of sale and the remaining 80% are collected in the month subsequent to the sale.
- Budgeted sales for July are $140,000.
- 10% of merchandise inventory purchases are paid in cash at the time of the purchase. The remaining 90% of purchases are credit purchases. All purchases on credit are paid in the month subsequent to the purchase.
- Each month’s ending merchandise inventory should equal $10,000 plus 50% of the next month’s cost of goods sold.
- Depreciation expense is $1,000 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred.
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