As of December 31, 2010 (the end of the prior quarter), the company's general ledger showed the following account balances:
Cash 48,200
Acct. Receivable 54,400
Inventory 30,600
Equipment (net) 53,800
Acct. Payable 59,000
Capital Stock 61,000
Retained Earnings 67,000
Sales for January is budgeted to be 500,000 and you expect sales thereafter to increase by 10% each month
Sales are 30% for cash and 70% on credit. All payments on credit sales are collected 60% in the month of sale and the remainder in the following month. The accounts receivable at December 31 are a result of December credit sales.
Cost of goods sold is 40% of sales. The company desires ending inventory of 25% of the following month's cost of goods sold.
60% of a month's inventory purchases are paid for in the month of purchase; the remainder is paid for in the following month. The account payable at December 31 is the result of December credit purchases.
Monthly selling and administrative expenses are budgeted as follows: salaries and wages 125,000 per month; advertising 10,000 per month; shipping 3% of sales; other expenses 5% of sales/ Depreciation is 3,000 in January and will increase to 25,000 per month per month thereafter. Salaries and advertising are paid in the month incurred and the other expenses are paid in the month following incurrence.
During February the company will purchase building and equipment for 200,000 cash.
During January you anticipate issuing a cash dividend of 25,000.
The company must maintain a minimum cash balance of 20,000. An open line of credit is available at a local bank for any borrowing that may be needed during the quarter. All borrowing is done at the beginning of a month and all repayments are made at the end of a month. Borrowing and repayment of principal must be in multiples of 1,000. Interest is paid only at the time of payment or principal. The annual interest rate is 12%. (Figure interest on whole months, e.g., 1/12, 2/12.)
FIND:
Prepare the following for the first quarter of the year (show all calculations for each month)
A. Sales budget
Cash collections budget
B. Inventory purchases budget
Schedule of cash disbursements for purchases
C. Selling and administrative expense budget
Schedule of cash disbursement for selling and administrative expenses
D. Cash budget
Prepare a variable costing income statement for the quarter ending March 31, 2011. (60% of cost of goods sold is variable and 30% of the other expenses are variable)Prepare a balance sheet as of March 31, 2011