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    Master Budget

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    I have attached a excel sheet with all these statments formatted.

    Resha Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2009. The company president formed a planning committee to prepare a master budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks.

    A. October sales are estimated to be $120,000 of which 40% will be cash and 60% will be credit. The company expects sales to increase at the rate of 25% per month. Prepare a sales budget.

    B. The company expects to collect 100% of the accounts receivable generated by credit sales in the month following the sale. Prepare a schedule of cash receipts.

    C. The cost of goods sold is 60% of sales. The company desires to maintain a minimum ending inventory equal to 10% of the next month's cost of goods sold. Ending inventory of Decemeber is expected to be $12,000. Assume that all purchases are made on account. Prepare an inventory purchases budget.

    D. The company pays 70% of accounts payable in the month of purchase and the remaining 30% in the following month. Prepare a cash payments budget for inventory purchases.

    E. **See Given on Excel Attachment**

    F. Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for selling and adminstrative expenses.

    G. Resha borrows funds, in increments of $1,000, and repays them on the last day of month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. To be prudent, the company desires to maintain a $12,000 cash cushion. Prepare a cash budget.

    H. Prepare a pro forma income statement for the quarter.

    I. Prepare a pro forma balance sheet at the end of the quarter.

    J. Prepare a pro forma statement of cash flows for the quarter.

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    Solution Summary

    The solution explains how to prepare the various components of a master budget