Vonn Company, a furniture store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the quarter:
- As of the end of the prior quarter, September 30, the companyâ€™s general ledger showed the following account balances:
- Cash $62,000 (debit)
- Accounts receivable $480,000 (debit)
- Inventory $78,000 (debit)
- Buildings and equipment, net $570,000 (debit)
- Accounts payable $193,000 (credit)
- Capital stock $300,000 (credit)
- Retained earnings $619,000 (credit)
- Actual sales for September and budgeted sales for the next four months are as follows: September $280,000, October $400,000, November $600,000, December $300,000 and January $200,000.
- Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following sale. The accounts receivable at December 31 are a result of December credit sales.
- The companyâ€™s gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.)
- Monthly expenses are budgeted as follows: salaries and wages, $27,000 per month; advertising, $70,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $42,000 per quarter.
- Each monthâ€™s ending inventory should equal 25% of the following monthâ€™s cost of goods sold.
- One half of the monthâ€™s inventory purchases is paid for in the month of purchase; the other half is paid in the following month.
- During November, the company will purchase a new copy machine for $1,700 cash. During December, other equipment will be purchased for cash at a cost of $84,500.
- During October, the company will declare and pay $45,000 in cash dividends.
- Management wants to maintain a minimum cash balance of $30,000. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans 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.
Using the data above, populate the following statements and schedules for the October-December quarter. Submit your responses in an Excel spreadsheet neatly organized. If desired, you may modify the schedule formats as necessary to show your work as long as all of the content is included.
- Schedule of expected cash collections
- Merchandise purchases budget
- Schedule of expected cash disbursements for merchandise purchases
- Schedule of expected cash disbursements for selling and administrative expenses
- Cash budget:
|Schedule of Expected Cash Collections|
|Merchandise Purchases Budget|
|Budgeted Cost of Goods Sold|
|Add desired ending inventory|
|Less beginning inventory|
|Schedule of Expected Cash Disbursements-Merchandise Purchases|
|Schedule of Expected Cash Disbursements-Selling and Administrative Expenses|
|Salaries and wages|
|Cash balance, beginning|
|Add cash collections|
|Total cash available|
|Less cash disbursements|
|For selling & admin exp.|
|For purchase of equipment|
|For cash dividends|
|Total cash disbursements|
|Excess (deficiency) of cash|
|Cash balance, ending|
Submit your responses in an Excel spreadsheet, neatly organized. Reference Lynda.com in the
CSU-Global Library (Links to an external site.) for Microsoft Excel tutorials or use the Excel Tutorials link found in the classroom if assistance is needed.