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CZ is merchandising company engaged in the purchasing and selling of electrical appliances. You as a management accountant have been asked to prepare a complete master budget for your store for June,July and August, so you gather the following data as of may 31,2005:
Accounts receivable 261,000
Net furniture and fixtures 120,000
Total assets 702,000
Accounts payable 340,000
Owners equity 362,000
Total liabilities and owners equity 702,000
Recent and projected sales
Credit sales are 90% of total sales.Credit accounts are collected 80% in the month following the sales and 20% in the next following month. Assume that bad debts are negligible and can be ignored. The average gross profit on sales is40%.
The policy is to acquired enough inventories each month to equal the following months projected sales. All purchase are paid for in the month following purchase.
Salaries,wages and commissions average 20% of sales: all other variable expenses are 4% of sales. Fixed expenses for rent, property taxes and miscellaneous payroll and other items are 40,000 monthly. Assume that these variable and fixed expenses require cash disbursements each month.Depreciation is 2,000 monthly.
In June, 40,000 is going to be disbursed for fixtures acquired in May. The May 31 balance of accounts payable includes this amount.
Assume that a minimum cash balance of 20,000 is to be maintained. Also assume that all borrowing are effective at the beginning of the month and all repayments are made at the end of the month of repayment. Interest is paid only at the repaying principal. Interest rate is 12% per annum: round interest computation to the nearest ten dollars.
1, Prepare the sales budget
2, Prepare the cash collection budget
3, Prepare a budget income statement for the coming quarter
4, Prepare the budget balance sheet
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