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    Master Budget Excel Project: ABC Company

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    Assume ABC Company has asked you to not only prepare their 2013 year-end Balance Sheet but to also provide pro-forma financial statements for 2014. In addition, they have asked you to evaluate their company based on the pro-forma statements with regard to ratios. They also want you to evaluate 3 projects they are considering. Their information is as follows:
    End of the year information:
    Account 12/31/13
    Ending Balance
    Cash 160,000
    Accounts Receivable 126,000
    Inventory 75,200
    Equipment 745,000
    Accumulated Depreciation 292,460
    Accounts Payable 36,900
    Short-term Notes Payable 18,300
    Long-term Notes Payable 157,225
    Common Stock 450,000
    Retained Earnings Solve

    Additional Information:
    • Sales for December total 12,000 units. Each month's sales are expected to exceed the prior month's results by 5%. The product's selling price is $15 per unit.
    • Company policy calls for a given month's ending inventory to equal 80% of the next month's expected unit sales. The December 31 2012 inventory is 9,400 units, which complies with the policy. The purchase price is $8 per unit.
    • Sales representatives' commissions are 10.0% of sales and are paid in the month of the sales. The sales manager's monthly salary will be $3,500 in January and $4,000 per month thereafter.
    • Monthly general and administrative expenses include $8,000 administrative salaries, $5,000 depreciation, and 0.9% monthly interest on the long-term note payable.
    • The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none is collected in the month of sale).
    • All merchandise purchases are on credit, and no payables arise from any other transactions. One month's purchases are fully paid in the next month.

    • The minimum ending cash balance for all months is $140,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance.
    • Dividends of $100,000 are to be declared and paid in February.
    • No cash payments for income taxes are to be made during the first calendar quarter. Income taxes will be assessed at 35% in the quarter.
    • Equipment purchases of $55,000 are scheduled for March.

    Required Action:
    Part A:
    • Prepare the year-end balance sheet for 2013. Be sure to use proper headings.
    • Prepare budgets such that the pro-forma financial statements may be prepared.
    • Sales budget, including budgeted sales for April.
    • Purchases budget, the budgeted cost of goods sold for each month and quarter, and the cost of the March 31 budgeted inventory.
    • Selling expense budget.
    • General and administrative expense budget.
    • Expected cash receipts from customers and the expected March 31 balance of accounts receivable.
    • Expected cash payments for purchases and the expected March 31 balance of accounts payable.
    • Cash budget.
    • Budgeted income statement.
    • Budgeted statement of retained earnings.
    • Budgeted balance sheet.

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    Solution Preview

    See attached excel spreadsheet for detailed responses. Click in cells to see computations. Each budget is on a separate tab.

    Formatting does not work in this screen as you see (see look at excel):

    ABC Company
    Cash Budget
    Jan Feb Mar ...

    Solution Summary

    See attached excel spreadsheet for detailed responses. Click in cells to see computations.