Marconi, Inc. a retailer of speciality paints, prepares a master budget. Data for the September master budget are given below. Prepare a balance sheet, an income statement and cash budget for September.
a. The August 31 balance sheet:
Current assets as of August 31:
Accounts receivable 90,000
Buildings and equipment, net 200,000
Accounts payable $53,760
Capital stock 265,000
Retained earnings $25,540
b. Actual and budgeted sales data for September, October, and November are as follows:
August (actual) $120,000
c. Sales are 25% for cash and 75% on credit. Credit sales are collected in the month following sale. There are no bad debts.
d. The gross margin percentage is 60% of sales. The desired ending inventory is equal to 20% of the following months sales. One fifth of the purchases are paid for in the month of purchase and the others are purchased on account and paid in full the following month.
e. The monthly cash operating expenses are $80,000 including the monthly depreciation expense of $7,000.
f. During September, Marconi Incorporated will purchase new office equipment for $17,000 cash.
g. Dividends of $13,500 were declared and paid in September.
h. The company must maintain a minimum cash balance of $25,000. A line of credit is used to maintain this balance. Borrowing will be made in increments of $1,000. All borrowing is done at the beginning of the month and repayments are made at the end of the month. The annual interest rate is 12%, paid when the loan is repaid (ignore accrual of interest).
Using the data above:
Complete the following schedule:
Schedule of Expected Cash Collections
Merchandise Purchases Budget
Schedule of Expected Cash Disbursements
Schedule of Expected Cash Disbursements -Selling and Administrative Expenses Cash Budget
The attached MS Excel spreadsheet contains detailed instructions for the creation of the following: Schedule of Expected Cash Collections, Merchandise Purchases, Expected Cash Disbursements, Selling and Administrative Expenses, Cash Budget, Income Statement, and Balance Sheet.