SURVEY OF ACCOUNTING 360DAY CONNECT CAR
5th Edition
ISBN: 9781260591811
Author: Edmonds
Publisher: MCG
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Textbook Question
Chapter 14, Problem 23P
Problem 7-23A Preparing a
Camden 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 co-ordinator, you have been assigned the following tasks:
Required
Round all computations to the nearest whole dollar.
- a. October sales are estimated to be $125,000, of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 8 percent per month. Prepare a sales budget.
- b. 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.
- c. The cost of goods sold is 60 percent of sales. The company desires to maintain a minimum ending inventory equal to 10 percent of the next month’s cost of goods sold. However, ending inventory of December is expected to be $6,000. Assume that all purchases are made on account. Prepare an inventory purchases budget.
- d. 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.
- e. Budgeted selling and administrative expenses per month follow:
Salary expense (fixed) | $9,000 |
Sales commissions | 5% of Sales |
Supplies expense | 2% of Sales |
Utilities (fixed) | $700 |
$2,000 | |
Rent (fixed) | $2,400 |
Miscellaneous (fixed) | $600 |
*The capital expenditures budget indicates that Camden will spend $82,000 on October 1 for store fixtures, which are expected to have a $10,000 salvage value and a three-year (36-month) useful life. |
Use this information to prepare a selling and administrative expenses budget.
- f. 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.
- g. Camden 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 1 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $6,000 cash cushion. Prepare a
cash budget . - h. Prepare a pro forma income statement for the quarter.
- i. Prepare a pro forma balance sheet at the end of the quarter.
- j. Prepare a pro forma statement of
cash flows for the quarter.
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SURVEY OF ACCOUNTING 360DAY CONNECT CAR
Ch. 14 - Prob. 1QCh. 14 - Prob. 2QCh. 14 - 3.What are the three levels of planning? Explain...Ch. 14 - 4.What is the primary factor that distinguishes...Ch. 14 - 5.What is the advantage of using a perpetual...Ch. 14 - Prob. 6QCh. 14 - Prob. 7QCh. 14 - 8. Ken Shilov, manager of the marketing...Ch. 14 - Prob. 9QCh. 14 - 10.What is the normal starting point in developing...
Ch. 14 - 11. How does the level of inventory affect the...Ch. 14 - 12.What are the components of the cash budget?...Ch. 14 - 13.The primary reason for preparing a cash budget...Ch. 14 - 14.What information does the pro forma income...Ch. 14 - 15.How does the pro forma statement of cash flows...Ch. 14 - Exercise 7-1A Budget responsibility Teresa...Ch. 14 - Exercise 7-2A Preparing a sales budget Parliament...Ch. 14 - Prob. 3ECh. 14 - Exercise 7-4A Preparing sales budgets with...Ch. 14 - Exercise 7-5A Determining cash receipts from...Ch. 14 - Exercise 7-6A Using judgment in making a sales...Ch. 14 - Exercise 7-7A Preparing an inventory purchases...Ch. 14 - Exercise 7-8A Preparing a schedule of cash...Ch. 14 - Exercise 7-9A Determining the amount of expected...Ch. 14 - Exercise 7-10A Preparing inventory purchases...Ch. 14 - Exercise 7-11A Preparing a schedule of cash...Ch. 14 - Prob. 12ECh. 14 - Exercise 7-13A Preparing a cash budget The...Ch. 14 - Exercise 7-14A Determining amount to borrow and...Ch. 14 - Prob. 15ECh. 14 - Problem 7-16A Behavioral impact of budgeting...Ch. 14 - Prob. 17PCh. 14 - Problem 7-18A Preparing an inventory purchases...Ch. 14 - Prob. 19PCh. 14 - Problem 7-21A Preparing a cash budget Fayette...Ch. 14 - Prob. 21PCh. 14 - Problem 7-22A Preparing budgets with multiple...Ch. 14 - Problem 7-23A Preparing a master budget for retail...Ch. 14 - ATC 7-1 Business Applications Case Preparing and...Ch. 14 - ATC7-2 Group Assignment Master budget and pro...Ch. 14 - ATC 7-4 Writing Assignment Continuous budgeting...Ch. 14 - Ethical Dilemma Bad budget system or unethical...
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