nordic company merchandising company prepares its master budget quarterly basis following da

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 $ 12,000         
  Accounts receivable   49,600         
  Inventory   14,760         
  Buildings and equipment (net)   222,000         
  Accounts payable     $ 20,400    
  Capital stock       110,000    
  Retained earnings       167,960    
 

  $ 298,360      $ 298,360    
 




 

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

 

   
  March (actual) $62,000  
  April $82,000  
  May $92,000  
  June $97,000  
  July $52,000  

 

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, $9,500 per month; shipping, 5% of sales; advertising, $6,200 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, $12,500; and May, $6,000.

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.

 

Required:
Using the data above, complete the following statements and schedules for the second quarter:
1. Schedule of expected cash collections:

 

Schedule of expected cash collections
       April        May        June        Total
  Cash sales $ 16,400      $ : desired ending inventory 16,560   : beginning inventory 14,760                       [removed]   [removed]  
 

  Total liabilities and stockholders’ equity   $ [removed]  
   


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