UYEN DINH. ACC 2355 _ Managerial Accounting II_ Section 800 MASTER BUDGET ASSIGNMENT

Transcription

1 UYEN DINH Professor: STEPHEN BROWN ACC 2355 _ Managerial Accounting II_ Section 800 MASTER BUDGET ASSIGNMENT The 1 st quarter master budget of Lim Corporation contains the following schedules, which are displayed and explained in the following pages: Schedule Title of Schedule Sales Budget 1 Expected Cash Collection 2 Merchandise Purchasing Budget 3 Cash Disbursement Budget 4 Summary Cash Budget 5 Absorption costing income statement 6 Balance sheet as of March 31

2 Sales Budget The first step in developing Lim Corporation s 1st quarter master budget is to prepare the sale budget. Let s make assumption that the budget year is 20X1. Following is schedule 1, sale budget of Lim Corporation, based on the data b and c: Sales Budget For the quarter Ending March 31, 20X1 20X0 20X1 (Budgeted Sales) December (Actual) January February March 1 st Quarter April ( 1 ) Total Sales Cash Sales ( 2 )= 40%*Sales Credit Sales ( 3 )= 60%*Sales Schedule 1. Schedule of Expected Cash Collection Also based on the date b and data c, Lim Corporation s cash receipts budget - schedule 1 detailed the expected cash collections during the 1 st quarter: Cash Receipt Budget For the quarter Ending March 31, 20X1 20X1 Cash Collection from: January February March 1 st Quarter ( 4 ) Cash Sales Credit Sales ( 5 ) ( 1 ) Quarter = January + February + March (ALWAYS) ( 2 ) Cash Sales = 40%*Sales January: = 40%*70000 February: = 40%*80000 ( 3 ) Credit Sales = 60%*Sales January: = 60%*70000 February: = 60%*80000 ( 4 ) Quarter = January + February + March ( 5 ) Credit Sales collection = 100% of previous month s credit sales January: = 60%*70000 February: = 60%*80000

3 Total Cash Receipts (Cash Collection) ( 6 ) Schedule 2. Merchandise Purchasing Budget This budget is based to the data a & d. Merchandise Purchasing Budget For the quarter Ending March 31, 20X1 20X1 January February March 1 st Quarter ( 7 ) Budgeted Cost of Goods Sold( 8 ) =70%*Sales Add: Desired ENDING inventory ( 9 ) ( 10 ) =20%*next month s COGS Total Needs ( 11 ) Less: BEGINNING Inventory ( 12 ) (9800) (11200) (11900) (9800) ( 13 ) Required purchases ( 14 ) ( 6 ) Total Cash receipt (Cash collection) =cash sales of current month + credit sales of prior month; OR Total Cash receipt =40%*sales + 60%*sales of prior month. For instant, January: = OR = 40%* %*60000 February: = OR = 40%* %*70000 ( 7 ) Quarter = January + February + March ( 8 ) Cost of Goods Sold =70%*Sales. For example, = 21000*70% ( 9 ) Desired ENDING inventory =20%*next month s COGS January: = 20%*56000 February: = 20%*59500 ( 10 ) Quarter s Desired Ending Inventory is equal to the desired ending Inventory of March 31. ( 11 ) Total Needs = Cost of Goods Sold + Desired Inventory ( 12 ) expected beginning inventory of finished goods ( 13 ) Quarter s beginning Inventory = the December ending inventory = the January beginning inventory ( 14 ) Required Budget = Total Needs BEGINING Inventory

4 Schedule 3. Expected Cash Disbursement The cash disbursement budget (schedule 3) details the expected cash payments during the 1 st quarter for Lim Corporation. The pink-shaded top portion shows the schedule of cash payments for the merchandise purchases which based on data e and the required purchases from schedule 2. The Selling, general, and Administrative expense budget shows the planned amounts of expenditures for selling, general, and administrative expenses during the 1 st quarter. Lim Corporation s selling and administrative expense budget is displayed as the shaded bottom portion part for selling and Administrative expense of schedule 3, based on the data f. Cash Disbursement Budget For the quarter Ending March 31, 20X1 For Merchandise Purchases: 20X1 December January February March 1 st Quarter ( 15 ) Required purchases (From schedule 2) ( 16 ) Total Disbursement for Purchases ( 17 ) For Selling and Administrative Expenses: ( 18 ) Commission Expense Rent Other expenses ( 19 ) Total Disbursements for Expenses ( 20 ) ( 15 ) Quarter = January + February + March ( 16 ) Required purchases of December = the account payable / 75% = / 75% = ( 17 ) Cash Payments for Purchases = 25% of current month s required purchases + 75% of prior month s required purchases. For example: January: 45150=25%* %*43400 February: 51975=25%* %*50400 ( 18 ) Beginning balance of the accounts payable ( 19 ) Other expenses = 8%*Sales (including $2400 Depreciation for the quarter) January: 5600=8%*70000 February: 6400=8%*80000 ( 20 ) Total Cash payment for expenses (Total expenses ) = Commissions + Rent + Other expenses

5 For Equipment Total cash disbursements ( 21 ) Schedule 4. Summary Cash Budget Analysis of short-term financing needs: In order to maintain cash balance of $5000 at the end of each month while we also need cash to pay for the equipment in data g, the following analysis table details the amount of cash we need to borrow from local bank. January February March 1 st quarter Cash balance at beginning of month Less: minimum cash balance (5000) (5000) (5000) (5000) Cash available for equipment purchases ( 22 ) Less: Cost of investment in Equipment (from schedule 3) Required short term borrowing ( 23 ) (3000) (11000) (2000) (8000) 0 (10000) The cash budget details the expected cash receipts and disbursements during the 1 st quarter. Lim Corporation s completed cash budget is displayed as schedule 4. The pink shaded top portion pulls together the cash receipts and cash disbursements detailed in schedule 1 and 3. Also, based on the data showing the cash balance of $6000 as of December 31, 20X0. Cash Budget For the quarter Ending March 31, 20X1 20X1 January February March 1 st Quarter ( 24 ) ( 21 ) Total cash disbursement = cash disbursement for inventory + for operating expenses + for equipment ( 22 ) Cash available for equipment purchase = beginning cash balance minimum cash balance required. (1000 = ) ( 23 ) Based on the data h which local bank allows company to borrow from $1000 up to the total balance of $ ( 24 ) Quarter = January + February + March

6 Cash balance, January 1, 20X Add: Cash receipts (cash collection) (from schedule 1) Total cash available Less: Total cash disbursements (from schedule 3) (67550) (80175) (76950) (224675) Excess (deficiency) of cash ( 25 ) 2450 (1175) Others (Financing) Add: Proceeds from bank loan ( 26 ) (From analysis of financing needs) Quarter Interest on bank loan ( 27 ) (at March 31, 20X1) Less: Repayment of bank loan ( 28 ) March 31, 20X1 CASH BALANCE March 31, 20X ( 29 ) ( 25 ) Excess of cash when total cash receipts > total cash disbursements, and vice versa, it is decicency of cash when the cash receipts < total cash disbursement. ( 26 ) Based on the data h which local bank allows company to borrow from $1000 up to the total balance of $ Therefore, proceeds from bank loan= required short term borrowing. ( 27 ) Interest bank loan = 1%per month*borrowing loan=3months*1%*10000=300 ( 28 ) based on the data h that we repay the loan plus interest at the end of the quarter ( 29 ) 1025 =

7 Schedule 5. Absorption Costing Income Statement Absorption Costing Income Statement For the quarter Ended March 31, 20X1 1 st Quarter ( 30 ) Sales Revenue (from sale budget) Less: Cost of Goods Sold (from schedule 2) (164500) Gross Margin ( 31 ) Less: Selling & Administrative expenses (From schedule 3) Less: Interest on bank loan (from schedule 4) NET INCOME (60200) (300) ( 32 ) Schedule 6. Balance Sheet as of March 31 ASSETS Cash (from schedule 4) Account Receivable ( 33 ) Building and Equipment ( 34 ) Inventory (from schedule 2) TOTAL: Budgeted Balance Sheet March 31, 20X1 $ 1025 $ $ $ ( 30 ) Quarter = January + February + March ( 31 ) Gross margin = Sales revenue Cost of Goods sold; OR = 30%*Sales (data a) = , OR = *30% ( 32 ) net income before tax = = ( 33 ) Account Receivable Beginning Jan sale on account (sale budget) cash collection from credit sales = ( 34 ) balance cost of equipment acquired depreciation 2400=119485

8 LIABILITY + EQUITY Common shares Retained earnings ( 35 ) Account payable ( 36 ) Total: ( 35 ) Beginning net income =40135 ( 36 ) beginning purchase cash payments for purchases (Schedule 3) = 41475

9 APPENDIX After using all the data information, I created this condensed table to describe in detail where the numbers come from, as well as which data I used. Based 20X0 20X1 (Budget) on data December (Actual) January February March 1 st Quarter April ( 37 ) b Sales a Gross margin ( 38 ) =30%*Sales a Cost of Goods Sold( 39 ) =70%*Sales c Cash Sales ( 40 )= 40%*Sales c Credit Sales ( 41 )= 60%*Sales Total Cash Receipts ( 42 ) d Desired ENDING inventory ( 43 ) ( 44 ) =20%*next month s COGS Total Needs ( 45 ) BEGINNING Inventory ( 46 ) ( 47 ) 7700 ( 37 ) Quarter = January + February + March ( 38 ) Gross margin =30%*Sales January: = 30%*70000 February: = 30%*80000 ( 39 ) Cost of Goods Sold =70%*Sales. For example, = 21000*70% ( 40 ) Cash Sales = 40%*Sales January: = 40%*70000 February: = 40%*80000 ( 41 ) Credit Sales = 60%*Sales January: = 60%*70000 February: = 60%*80000 ( 42 ) Total Cash receipt (Cash collection) =cash sales of current month + credit sales of prior month; OR Total Cash receipt =40%*sales + 60%*sales of prior month. For instant, January: = OR = 40%* %*60000 February: = OR = 40%* %*70000 ( 43 ) Desired ENDING inventory =20%*next month s COGS January: = 20%*56000 February: = 20%*59500 ( 44 ) Quarter s Desired Ending Inventory is equal to the desired ending Inventory of March 31. ( 45 ) Total Needs = Cost of Goods Sold + Desired Inventory

10 Required purchases ( 48 ) ( 49 ) e Total Disbursement for Purchases ( 50 ) ( 51 ) f Commission Expense f Rent f Other expenses ( 52 ) Total Disbursements for Expenses ( 53 ) f, g Equipment expenses ( 46 ) expected beginning inventory of finished goods ( 47 ) Quarter s beginning Inventory = the December ending inventory = the January beginning inventory ( 48 ) Required Budget = Total Needs BEGINING Inventory ( 49 ) Required purchases of December = the account payable / 75% = / 75% = ( 50 ) Cash Payments for Purchases = 25% of current month s required purchases + 75% of prior month s required purchases. For example: January: 45150=25%* %*43400 February: 51975=25%* %*50400 ( 51 ) Beginning balance of the accounts payable ( 52 ) Other expenses = 8%*Sales (including Depreciation of $2400) January: 5600=8%*70000 February: 6400=8%*80000 ( 53 ) Total Cash payment for expenses (Total expenses ) = Commissions + Rent + Other expenses