MAT 114 Lecture Notes - Lecture 8: Gross Margin, Earnings Before Interest And Taxes, Current Liability

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lavenderlouse921

27 Nov 2017

School

University of Kentucky

Department

Merchandising, Apparel and Textiles

Course

MAT 114

Professor

Morgan Clark

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Document Summary

Planning & control of buying & selling of goods & services. Always be prepared in advance of selling season. Language of budget must be easy to understand. Planned for a short period of time (six months is norm) Last step is determining gm gross margin. Provides a summary of the sales & expenses for given time. Shows financial condition at a particular point in time. Used to observe changes in firms financial condition. Assets: anything of value owned by retail firm. Current assets: cash or items that can be converted into cash(short period of time) Non-current assets: cannot be converted quickly into cash (long term) Goodwill: intangible asset retailer pays for when buying an existing business. Current liabilities: short-term debts-- due within a year (ex. Net worth (owner"s equity) - difference between total assets and total liabilities (personnel- not included but can be asset or liability) Lists in detail the source & type of all revenue (cash inflows)

Related Questions

[The following information applies to the questions displayed below.]

Beech Corporation is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The companyâs balance sheet as of June 30th is shown below:

Beech Corporation Balance Sheet June 30
Assets
Cash	$ 92,000
Accounts receivable	130,000
Inventory	48,600
Plant and equipment, net of depreciation	216,000

Total assets	$ 486,600

Liabilities and Stockholdersâ Equity
Accounts payable	$ 77,000
Common stock	329,000
Retained earnings	80,600

Total liabilities and stockholdersâ equity	$ 486,600

rev: 09_17_2014_QC_54310

value:
3.12 points

Required information

Beechâs managers have made the following additional assumptions and estimates:

1.	Estimated sales for July, August, September, and October will be $270,000, $290,000, $280,000, and $300,000, respectively.
2.	All sales are on credit and all credit sales are collected. Each monthâs credit sales are collected 35% in the month of sale and 65% in the month following the sale. All of the accounts receivable at June 30 will be collected in July.
3.	Each monthâs ending inventory must equal 30% of the cost of next monthâs sales. The cost of goods sold is 60% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at June 30 will be paid in July.
4.	Monthly selling and administrative expenses are always $50,000. Each month $5,000 of this total amount is depreciation expense and the remaining $45,000 relates to expenses that are paid in the month they are incurred.
5.	The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30.

Required:

1.	Prepare a schedule of expected cash collections for July, August, and September. Also compute total cash collections for the quarter ended September 30.

2-a.	Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30.

2-b.	Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September. Also compute total cash disbursements for merchandise purchases for the quarter ended September 30.

3.	Prepare an income statement for the quarter ended September 30.

4.	Prepare a balance sheet as of September 30.

rev: 09_17_2014_QC_54310

References

eBook & Resources

WorksheetLearning Objective: 08-02 Prepare a sales budget, including a schedule of expected cash collections.Learning Objective: 08-09 Prepare a budgeted income statement.

Difficulty: 1 EasyLearning Objective: 08-04 Prepare a direct materials budget, including a schedule of expected cash disbursements for purchases of materials.Learning Objective: 08-10 Prepare a budgeted balance sheet.

Check my work

value:
3.16 points

Required information

Beechâs managers have made the following additional assumptions and estimates:

1.	Estimated sales for July, August, September, and October will be $270,000, $290,000, $280,000, and $300,000, respectively.
2.	All sales are on credit and all credit sales are collected. Each monthâs credit sales are collected 45% in the month of sale and 55% in the month following the sale. All of the accounts receivable at June 30 will be collected in July.
3.	Each monthâs ending inventory must equal 20% of the cost of next monthâs sales. The cost of goods sold is 60% of sales. The company pays for 30% of its merchandise purchases in the month of the purchase and the remaining 70% in the month following the purchase. All of the accounts payable at June 30 will be paid in July.
4.	Monthly selling and administrative expenses are always $50,000. Each month $5,000 of this total amount is depreciation expense and the remaining $45,000 relates to expenses that are paid in the month they are incurred.
5.	The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30.

Required:

1.	Prepare a schedule of expected cash collections for July, August, and September. Also compute total cash collections for the quarter ended September 30.

2-a.	Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30.

2-b.	Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September. Also compute total cash disbursements for merchandise purchases for the quarter ended September 30.

3.	Prepare an income statement for the quarter ended September 30.

4.	Prepare a balance sheet as of September 30.

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MAT 114 Lecture Notes - Lecture 8: Gross Margin, Earnings Before Interest And Taxes, Current Liability

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