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Master Budget Assignment

This document provides information needed to prepare a master budget for a merchandising company for the months of June, July, and August 2005. It includes data on inventory, accounts receivable, cash, and liabilities as of May 31, 2005 as well as sales projections and expenses. The company needs a cash budget statement and projected income statement for the quarter and a budgeted balance sheet for August 30, 2005.

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Abreham Awoke
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136 views

Master Budget Assignment

This document provides information needed to prepare a master budget for a merchandising company for the months of June, July, and August 2005. It includes data on inventory, accounts receivable, cash, and liabilities as of May 31, 2005 as well as sales projections and expenses. The company needs a cash budget statement and projected income statement for the quarter and a budgeted balance sheet for August 30, 2005.

Uploaded by

Abreham Awoke
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Assignment Question on Master budget

CZ is a 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:
Cash $ 21,000 Accounts Payable $ 340,000
Inventory 300,000 Owners' equity 362,000
Accounts receivable 261,000 Total liabilities and
Net furnitures and fixtures 120,000 owners' equity 702,000
Total Assets 702,000
Recent and projected sales
April $200,000
May 250,000
June 500,000
July 300,000
August 300,000
September 200,000

Credit sales are 90% of total sales. Credit accounts are collected 80% in the month following the
sale and 20% in the next following month. Assume that bad debts are negligible and can be
ignored. The average gross profit on sales is 40%.

Each month’s ending inventory is equal to the following month's projected sales. All purchases
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
borrowings 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.
Required
A. Prepare a budgeted income statement for the coming quarter.
B. Cash Budget statement of monthly cash receipts and disbursements (for the next 3
months)
C. Budgeted balance sheet for August 30, 2005.

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