Nordic Company, a merchandising company, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of the master budget for the second quarter. a. As of March 31 (the end of the prior quarter), the company’s balance sheet showed the following account balances: Cash . . . . . . . . . . . . . . . . . . $ 9,000 Accounts receivable . . . . . . 48,000 Inventory. . . . . . . . . . . . . . . . 12,600 Buildings and equipment (net) . . 214,100 Accounts payable . . . . . . . . . . . . . .. . . . . . .. . . . . . . . $ 18,300 Capital stock . . . . . . . . . . . . . .. . . . . . .. . . . . . ...... . . . . 190,000 Retained earnings . . . . . . . . . . . . . . . . . .. . . . . . .... . . . 75,400 $283,700 $283,700 b. Actual sales for March and budgeted sales for April–July are as follows: March (actual) . . . $60,000 April . . . . . . . . . . . $70,000 May . . . . . . . . . . . . $85,000 June . . . . . . . . . . . . $90,000 July . . . . . . . . . . . . . $50,000 c. Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following the sale. The accounts receivable at March 31 are a result of March credit sales. d. The company’s gross margin percentage is 40% of sales. (In other words, cost of goods sold is 60% of sales.) e. Monthly selling and administrative expenses are budgeted as follows: salaries and wages, $7,500 per month; shipping, 6% of sales; advertising, $6,000 per month; other expenses, 4% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $6,000 for the quarter. f. Each month’s ending inventory should equal 30% of the following month’s cost of goods sold. g. Half of a month’s inventory purchases are paid for in the month of purchase and half in the following month. h. Equipment purchases during the quarter will be as follows: April, $11,500; and May, $3,000. i. Dividends totaling $3,500 will be declared and paid in June. j. Management wants to maintain a minimum cash balance of $8,000. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $20,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter. Schedule of expected cash collections: APRIL MAY JUN TOTAL CASH SALES $14000 $17000 $18000 $49000 CREIDT SALES $48000 $56000 $68000 $172000 TOTAL COLLECTIONS $62000 $73000 $86000 $221000 a. Merchandise purchases budget: APRIL MAY JUN TOTAL Budgeted cost of goods sold $42000 $51000 $54000 $147000 Add desired ending inventory $15300 ( $51000*30%) $16200 $9000 ( $50000*60%*30%) $9000 Total needs $57300 $67200 $63000 $158000 Less beginning inventory $12600 $15300 $16200 $12600 Required purchases $44700 $51900 $46800 $143400 *$70,000 sales × 60% = $42,000. †$51,000 × 30% = $15,300. Schedule of expected cash disbursements for merchandise purchases: APRIL MAY JUN TOTAL For March purchases $18300 $18300 For April purchases $22350 $22350 $44700 For May purchases $25950 $25950 $51900 For June purchases $23400 $23400 Total cash disbursements for purchases $40650 $48300 $49350 $138300 Schedule of expected cash disbursements for selling and administrative expenses: APRIL MAY JUN TOTAL Salaries and wages $7500 $7500 $7500 $22500 Shipping $4200 $5100 $5400 $14700 Advertising $6000 $6000 $6000 $18000 Other expenses $2800 $3400 $3600 $9800 Total cash disbursements for selling and administrative expenses $20500 $22000 $22500 $65000 REQUIRED: Cash budget: APRIL MAY JUN TOTAL Cash balance, beginning $9000 Add cash collections 62000 Total cash available $71000 Less cash disbursements: For inventory purchases $40650 For selling and administrative expenses 20500 For equipment purchases 11500 For dividends - Total cash disbursements $72650 Excess (deficiency) of cash Financing Etc. (1,650) 2. Prepare an absorption costing income statement for the quarter ending June 30 3. Prepare a balance sheet as of June 30.

Nordic Company, a merchandising company, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of the master budget for the second quarter. a. As of March 31 (the end of the prior quarter), the company’s balance sheet showed the following account balances: Cash . . . . . . . . . . . . . . . . . . $ 9,000 Accounts receivable . . . . . . 48,000 Inventory. . . . . . . . . . . . . . . . 12,600 Buildings and equipment (net) . . 214,100 Accounts payable . . . . . . . . . . . . . .. . . . . . .. . . . . . . . $ 18,300 Capital stock . . . . . . . . . . . . . .. . . . . . .. . . . . . ...... . . . . 190,000 Retained earnings . . . . . . . . . . . . . . . . . .. . . . . . .... . . . 75,400 $283,700 $283,700 b. Actual sales for March and budgeted sales for April–July are as follows: March (actual) . . . $60,000 April . . . . . . . . . . . $70,000 May . . . . . . . . . . . . $85,000 June . . . . . . . . . . . . $90,000 July . . . . . . . . . . . . . $50,000 c. Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following the sale. The accounts receivable at March 31 are a result of March credit sales. d. The company’s gross margin percentage is 40% of sales. (In other words, cost of goods sold is 60% of sales.) e. Monthly selling and administrative expenses are budgeted as follows: salaries and wages, $7,500 per month; shipping, 6% of sales; advertising, $6,000 per month; other expenses, 4% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $6,000 for the quarter. f. Each month’s ending inventory should equal 30% of the following month’s cost of goods sold. g. Half of a month’s inventory purchases are paid for in the month of purchase and half in the following month. h. Equipment purchases during the quarter will be as follows: April, $11,500; and May, $3,000. i. Dividends totaling $3,500 will be declared and paid in June. j. Management wants to maintain a minimum cash balance of $8,000. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $20,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter. Schedule of expected cash collections: APRIL MAY JUN TOTAL CASH SALES $14000 $17000 $18000 $49000 CREIDT SALES $48000 $56000 $68000 $172000 TOTAL COLLECTIONS $62000 $73000 $86000 $221000 a. Merchandise purchases budget: APRIL MAY JUN TOTAL Budgeted cost of goods sold $42000 $51000 $54000 $147000 Add desired ending inventory $15300 ( $5100030%) $16200 $9000 ( $5000060%30%) $9000 Total needs $57300 $67200 $63000 $158000 Less beginning inventory $12600 $15300 $16200 $12600 Required purchases $44700 $51900 $46800 $143400 $70,000 sales × 60% = $42,000. †$51,000 × 30% = $15,300. Schedule of expected cash disbursements for merchandise purchases: APRIL MAY JUN TOTAL For March purchases $18300 $18300 For April purchases $22350 $22350 $44700 For May purchases $25950 $25950 $51900 For June purchases $23400 $23400 Total cash disbursements for purchases $40650 $48300 $49350 $138300 Schedule of expected cash disbursements for selling and administrative expenses: APRIL MAY JUN TOTAL Salaries and wages $7500 $7500 $7500 $22500 Shipping $4200 $5100 $5400 $14700 Advertising $6000 $6000 $6000 $18000 Other expenses $2800 $3400 $3600 $9800 Total cash disbursements for selling and administrative expenses $20500 $22000 $22500 $65000 REQUIRED: Cash budget: APRIL MAY JUN TOTAL Cash balance, beginning $9000 Add cash collections 62000 Total cash available $71000 Less cash disbursements: For inventory purchases $40650 For selling and administrative expenses 20500 For equipment purchases 11500 For dividends - Total cash disbursements $72650 Excess (deficiency) of cash Financing Etc. (1,650) 2. Prepare an absorption costing income statement for the quarter ending June 30 3. Prepare a balance sheet as of June 30.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter7: Budgeting

Section: Chapter Questions

Problem 6PA: Relevant data from the Poster Companys operating budgets are: Additional data: Capital assets were...

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Question

Nordic Company, a merchandising company, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of the master budget for the second quarter.

a. As of March 31 (the end of the prior quarter), the company’s balance sheet showed the following account balances:

Cash . . . . . . . . . . . . . . . . . . $ 9,000
Accounts receivable . . . . . . 48,000
Inventory. . . . . . . . . . . . . . . . 12,600
Buildings and equipment (net) . . 214,100
Accounts payable . . . . . . . . . . . . . .. . . . . . .. . . . . . . . $ 18,300
Capital stock . . . . . . . . . . . . . .. . . . . . .. . . . . . ...... . . . . 190,000
Retained earnings . . . . . . . . . . . . . . . . . .. . . . . . .... . . . 75,400
$283,700 $283,700

b. Actual sales for March and budgeted sales for April–July are as follows:

March (actual) . . . $60,000
April . . . . . . . . . . . $70,000
May . . . . . . . . . . . . $85,000
June . . . . . . . . . . . . $90,000
July . . . . . . . . . . . . . $50,000

c. Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following the sale. The accounts receivable at March 31 are a result of March credit sales.
d. The company’s gross margin percentage is 40% of sales. (In other words, cost of goods sold is 60% of sales.)
e. Monthly selling and administrative expenses are budgeted as follows: salaries and wages, $7,500 per month; shipping, 6% of sales; advertising, $6,000 per month; other expenses, 4% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will
be $6,000 for the quarter.
f. Each month’s ending inventory should equal 30% of the following month’s cost of goods sold.
g. Half of a month’s inventory purchases are paid for in the month of purchase and half in the
following month.
h. Equipment purchases during the quarter will be as follows: April, $11,500; and May, $3,000.
i. Dividends totaling $3,500 will be declared and paid in June.
j. Management wants to maintain a minimum cash balance of $8,000. The company has an
agreement with a local bank that allows the company to borrow in increments of $1,000 at
the beginning of each month, up to a total loan balance of $20,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded.
The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

Schedule of expected cash collections:

	APRIL	MAY	JUN	TOTAL
CASH SALES	$14000	$17000	$18000	$49000
CREIDT SALES	$48000	$56000	$68000	$172000
TOTAL COLLECTIONS	$62000	$73000	$86000	$221000

a. Merchandise purchases budget:

	APRIL	MAY	JUN	TOTAL
Budgeted cost of goods sold	$42000	$51000	$54000	$147000
Add desired ending inventory	$15300 ( $51000*30%)	$16200	$9000 ( $5000060%30%)	$9000
Total needs	$57300	$67200	$63000	$158000
Less beginning inventory	$12600	$15300	$16200	$12600
Required purchases	$44700	$51900	$46800	$143400

*$70,000 sales × 60% = $42,000.
†$51,000 × 30% = $15,300.

Schedule of expected cash disbursements for merchandise purchases:

	APRIL	MAY	JUN	TOTAL
For March purchases	$18300			$18300
For April purchases	$22350	$22350		$44700
For May purchases		$25950	$25950	$51900
For June purchases			$23400	$23400
Total cash disbursements for purchases	$40650	$48300	$49350	$138300

Schedule of expected cash disbursements for selling and administrative expenses:

	APRIL	MAY	JUN	TOTAL
Salaries and wages	$7500	$7500	$7500	$22500
Shipping	$4200	$5100	$5400	$14700
Advertising	$6000	$6000	$6000	$18000
Other expenses	$2800	$3400	$3600	$9800
Total cash disbursements for selling and administrative expenses	$20500	$22000	$22500	$65000

REQUIRED:

Cash budget:

	APRIL	MAY	JUN	TOTAL
Cash balance, beginning	$9000
Add cash collections	62000
Total cash available	$71000
Less cash disbursements:
For inventory purchases	$40650
For selling and administrative expenses	20500
For equipment purchases	11500
For dividends	-
Total cash disbursements	$72650
Excess (deficiency) of cash Financing Etc.	(1,650)

2. Prepare an absorption costing income statement for the quarter ending June 30
3. Prepare a balance sheet as of June 30.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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