Developing a Master Budget for a Merchandising Organization Peyton Department Store prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for 2010. PEYTON DEPARTMENT STORE Balance Sheet March 31, 2010 Assets Liabilities and Stockholders' Equity Cash $2,000 Accounts payable $26,000 Accounts receivable 25,000 Dividends payable 17,000 Inventory 30,000 Rent payable 1,000 Prepaid Insurance 2,000 Stockholders' equity 40,000 Fixtures 25,000 Total assets $84,000 Total liabilities and equity $84,000 Actual and forecasted sales for selected months in 2010 are as follows:
MonthSales Revenue
January$50,000
February50,000
March40,000
April50,000
May60,000
June70,000
July90,000
August80,000
Monthly operating expenses are as follows:
Wages and salaries$27,000
Depreciation100
Utilities1,000
Rent2,000
Cash dividends of $17,000 are declared during the third month of each quarter and are paid during the first month of the following quarter. Operating expenses, except insurance, rent, and depreciation are paid as incurred. Rent is paid during the following month. The prepaid insurance is for five more months. Cost of goods sold is equal to 50 percent of sales. Ending inventories are sufficient for 120 percent of the next month's sales. Purchases during any given month are paid in full during the following month. All sales are on account, with 50 percent collected during the month of sale, 40 percent during the next month, and 10 percent during the month thereafter. Money can be borrowed and repaid in multiples of $1,000 at an interest rate of 12 percent per year. The company desires a minimum cash balance of $3,000 on the first of each month. At the time the principal is repaid, interest is paid on the portion of principal that is repaid. All borrowing is at the beginning of the month, and all repayment is at the end of the month. Money is never repaid at the end of the month it is borrowed.
(a) Prepare a purchases budget for each month of the second quarter ending June 30, 2010.
Peyton Department Store
Monthly Purchase Budget
Quarter Ending June 30, 2010
AprilMayJuneTotal
Budgeted purchases$Answer$Answer$Answer$Answ er
(b) Prepare a cash receipts schedule for each month of the second quarter ending June 30, 2010. Do not include borrowings.
Peyton Department Store
Schedule of Monthly Cash Receipts
Quarter Ending June 30, 2010
AprilMayJuneTotal
Total cash receipts$Answer$Answer$Answer$Answe r
(c) Prepare a cash disbursements schedule for each month of the second quarter ending June 30, 2010. Do not include repayments of borrowings.
Peyton Department Store
Schedule of Monthly Cash Disbursements
Quarter Ending June 30, 2010
AprilMayJuneTotal
Total cash disbursements$Answer$Answer$Answer$ Answer
(d) Prepare a cash budget for each month of the second quarter ending June 30, 2010. Include budgeted borrowings and repayments.
Only use negative signs, if needed, for: excess receipts over disbursements, balance before borrowings and cash balances (beginning and ending).
Peyton Department Store
Monthly Cash Budget
Quarter Ending June 30, 2010
AprilMayJuneTotal
Cash balance, beginning$Answer$Answer$Answer$Answ er
ReceiptsAnswerAnswerAnswerAnswer
DisbursementsAnswerAnswerAnswerAnsw er
Excess receipts over disb. AnswerAnswerAnswerAnswer
Balance before borrowingsAnswerAnswerAnswerAnswer< br /> BorrowingsAnswerAnswerAnswerAnswer< br /> Loan repaymentsAnswerAnswerAnswerAnswer< br /> Cash balance, ending$Answer$Answer$Answer$Answer< br /> (e) Prepare an income statement for each month of the second quarter ending June 30, 2010.
Only use negative signs to show net losses in income.
Peyton Department Store
Budgeted Monthly Income Statements
Quarter Ending June 30, 2010
AprilMayJuneTotal
Sales$Answer$Answer$Answer$Answer Cost of salesAnswerAnswerAnswerAnswer
Gross profitAnswerAnswerAnswerAnswer
Operating expenses:
Wages and salariesAnswerAnswerAnswerAnswer
DepreciationAnswerAnswerAnswerAnswe r
UtilitiesAnswerAnswerAnswerAnswer RentAnswerAnswerAnswerAnswer
InsuranceAnswerAnswerAnswerAnswer InterestAnswerAnswerAnswerAnswer
Total expensesAnswerAnswerAnswerAnswer
Net income$Answer$Answer$Answer$Answer< br /> (f) Prepare a budgeted balance sheet as of June 30, 2010.
Peyton Department Store
Budgeted Balance Sheet
June 30, 2010
AssetsLiabilities and Equity
Cash$AnswerMerchandise payable$Answer
Accounts receivableAnswerDividend payableAnswer
InventoryAnswerRent payableAnswer
Prepaid insuranceAnswerLoans payableAnswer
FixturesAnswerInterest payableAnswer
Total assets$AnswerStockholders' equityAnswer
Total liab. & equity$Answer