R A Chad Associates, a merchandising company, prepares its master budget on a quarterly basis. The following data have been assembled to assist in the preparation of the master budget for the final quarter. (a) As of September 30, 2005, the company’s balance sheet showed the following account balances: Cash $18 000 Accounts receivables 96 000 Inventory 25 200 Building & equipment (net) 428 200 Accounts payable $36 600 Capital 380 000 Retained earnings 150 800 $567 400 $567 400 (b) Actual sales for September and budgeted sales for the final quarter are as follows: September (actual) $120 000 October 140 000 November 170 000 December 180 000 January 100 000 (c) Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following the sale. The accounts receivable at September 30 are as a result of September credit sales. (a) The company’s gross profit rate is 40% of sales. The cost of goods sold is 60% of sales. (b) Monthly expenses are budgeted as follows: salaries and wages, $15 000 per month, shipping 6% of sales, advertising $12 000 per month, other expenses 4% of sales, depreciation of equipment will be $12 000 for the quarter. (c) At the end of each month, inventory is to be on hand equal 30% of the following month’s cost of goods sold. (d) Half of the month’s inventory purchases are paid for in the month of purchase and half in the following month. (e) Equipment purchases during the quarter will be as follows: October $23 000 and November $6 000. Dividends totalling $6 000 will be paid in December. Required: Prepare the Cash budget along with the supporting schedules necessary for the quarter ending December 31, 2005
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.
R A Chad Associates, a merchandising company, prepares its
The following data have been assembled to assist in the preparation of the master budget for the
final quarter.
(a) As of September 30, 2005, the company’s balance sheet showed the following account
balances:
Cash $18 000
Accounts receivables 96 000
Inventory 25 200
Building & equipment (net) 428 200
Accounts payable $36 600
Capital 380 000
Retained earnings 150 800
$567 400 $567 400
(b) Actual sales for September and budgeted sales for the final quarter are as follows:
September (actual) $120 000
October 140 000
November 170 000
December 180 000
January 100 000
(c) Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in
the month following the sale. The accounts receivable at September 30 are as a result of
September credit sales.
(a) The company’s gross profit rate is 40% of sales. The cost of goods sold is 60% of sales.
(b) Monthly expenses are budgeted as follows: salaries and wages, $15 000 per month,
shipping 6% of sales, advertising $12 000 per month, other expenses 4% of sales,
depreciation of equipment will be $12 000 for the quarter.
(c) At the end of each month, inventory is to be on hand equal 30% of the following month’s
cost of goods sold.
(d) Half of the month’s inventory purchases are paid for in the month of purchase and half in
the following month.
(e) Equipment purchases during the quarter will be as follows: October $23 000 and
November $6 000. Dividends totalling $6 000 will be paid in December.
Required:
Prepare the
December 31, 2005
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