Developing a Master Budget for a Merchandising Organization
(LO3)
Peyton Department Store prepares budgets quarterly. Thefollowing information is available for use in
planning the second quarter budgets for 2014.
PEYTON DEPARTMENT STORE
Balance Sheet
March 31, 2014
Assets Liabilities and Stockholders� Equity
Cash ........................... $ 3,000 Accountspayable................. $26,000
Accounts receivable............... 25,000 Dividends payable................ 17,000
Inventory........................ 30,000 Rent payable.................... 2,000
Prepaid insurance................. 2,000 Stockholders� equity.............. 40,000
Fixtures......................... 25,000
Total assets...................... $85,000 Total liabilities andequity ........... $85,000
Actual and forecasted sales for selected months in 2014 are asfollows:
Month Sales Revenue
January............................................................$60,000
February...........................................................50,000
March.............................................................40,000
April..............................................................50,000
May...............................................................60,000
June..............................................................70,000
July...............................................................90,000
August............................................................80,000
Monthly operating expenses are as follows:
Wages and salaries.........................................................$25,000
Depreciation...............................................................100
Utilities...................................................................1,000
Rent.....................................................................2,000
Cash dividends of $17,000 are declared during the third month ofeach quarter and are paid during the ?rst
month of the following quarter. Operating expenses, exceptinsurance, rent, and depreciation are paid as
incurred. Rent is paid during the following month. The prepaidinsurance is for ?ve more months. Cost
of goods sold is equal to 50 percent of sales. Endinginventories are suf?cient for 120 percent of the next
month�s sales. Purchases during any given month are paid in fullduring the following month. All sales
are on account, with 50 percent collected during the month ofsale, 40 percent during the next month, and
10 percent during the month thereafter. Money can be borrowedand repaid in multiples of $1,000 at an
interest rate of 12 percent per year. The company desires aminimum cash balance of $3,000 on the ?rst of
each month. At the time the principal is repaid, interest ispaid on the portion of principal that is repaid. All
borrowing is at the beginning of the month, and all repayment isat the end of the month. Money is never
repaid at the end of the month it is borrowed.
Required
a. Prepare a purchases budget for each month of the secondquarter ending June 30, 2014.
b. Prepare a cash receipts schedule for each month of the secondquarter ending June 30, 2014. Do not
include borrowings.
c. Prepare a cash disbursements schedule for each month of thesecond quarter ending June 30, 2014.
Do not include repayments of borrowings.
d. Prepare a cash budget for each month of the second quarterending June 30, 2014. Include budgeted
borrowings and repayments.
e. Prepare an income statement for each month of the secondquarter ending June 30, 2014.
f. Prepare a budgeted balance sheet as of June 30, 2014-Just need F)
Developing a Master Budget for a Merchandising Organization
(LO3)
Peyton Department Store prepares budgets quarterly. Thefollowing information is available for use in
planning the second quarter budgets for 2014.
PEYTON DEPARTMENT STORE
Balance Sheet
March 31, 2014
Assets Liabilities and Stockholders� Equity
Cash ........................... $ 3,000 Accountspayable................. $26,000
Accounts receivable............... 25,000 Dividends payable................ 17,000
Inventory........................ 30,000 Rent payable.................... 2,000
Prepaid insurance................. 2,000 Stockholders� equity.............. 40,000
Fixtures......................... 25,000
Total assets...................... $85,000 Total liabilities andequity ........... $85,000
Actual and forecasted sales for selected months in 2014 are asfollows:
Month Sales Revenue
January............................................................$60,000
February...........................................................50,000
March.............................................................40,000
April..............................................................50,000
May...............................................................60,000
June..............................................................70,000
July...............................................................90,000
August............................................................80,000
Monthly operating expenses are as follows:
Wages and salaries.........................................................$25,000
Depreciation...............................................................100
Utilities...................................................................1,000
Rent.....................................................................2,000
Cash dividends of $17,000 are declared during the third month ofeach quarter and are paid during the ?rst
month of the following quarter. Operating expenses, exceptinsurance, rent, and depreciation are paid as
incurred. Rent is paid during the following month. The prepaidinsurance is for ?ve more months. Cost
of goods sold is equal to 50 percent of sales. Endinginventories are suf?cient for 120 percent of the next
month�s sales. Purchases during any given month are paid in fullduring the following month. All sales
are on account, with 50 percent collected during the month ofsale, 40 percent during the next month, and
10 percent during the month thereafter. Money can be borrowedand repaid in multiples of $1,000 at an
interest rate of 12 percent per year. The company desires aminimum cash balance of $3,000 on the ?rst of
each month. At the time the principal is repaid, interest ispaid on the portion of principal that is repaid. All
borrowing is at the beginning of the month, and all repayment isat the end of the month. Money is never
repaid at the end of the month it is borrowed.
Required
a. Prepare a purchases budget for each month of the secondquarter ending June 30, 2014.
b. Prepare a cash receipts schedule for each month of the secondquarter ending June 30, 2014. Do not
include borrowings.
c. Prepare a cash disbursements schedule for each month of thesecond quarter ending June 30, 2014.
Do not include repayments of borrowings.
d. Prepare a cash budget for each month of the second quarterending June 30, 2014. Include budgeted
borrowings and repayments.
e. Prepare an income statement for each month of the secondquarter ending June 30, 2014.
f. Prepare a budgeted balance sheet as of June 30, 2014-Just need F)
Related questions
Peyton Department Store prepares budgets quarterly. Thefollowing information is available for use in planning the secondquarter budgets for 2014.
| PEYTON DEPARTMENTSTORE Balance Sheet March 31, 2014 | |||
|---|---|---|---|
| Assets | Liabilities andStockholders' Equity | ||
| Cash | $ 3,000 | Accounts payable | $26,000 |
| Accounts receivable | 25,000 | Dividends payable | 17,000 |
| Inventory | 30,000 | Rent payable | 2,000 |
| Prepaid Insurance | 2,000 | Stockholders' equity | 40,000 |
| Fixtures | 25,000 | ||
| Total assets | $85,000 | Total liabilities and equity | $85,000 |
Actual and forecasted sales for selected months in 2014 are asfollows:
| Month | Sales Revenue |
|---|---|
| January | $ 60,000 |
| February | 50,000 |
| March | 40,000 |
| April | 50,000 |
| May | 60,000 |
| June | 70,000 |
| July | 90,000 |
| August | 80,000 |
Monthly operating expenses are as follows:
| Wages and salaries | $ 25,000 |
| Depreciation | 100 |
| Utilities | 1,000 |
| Rent | 2,000 |
Cash dividends of $17,000 are declared during the third month ofeach quarter and are paid during the first month of the followingquarter. Operating expenses, except insurance, rent, anddepreciation are paid as incurred. Rent is paid during thefollowing month. The prepaid insurance is for five more months.Cost of goods sold is equal to 50 percent of sales. Endinginventories are sufficient for 120 percent of the next month'ssales. Purchases during any given month are paid in full during thefollowing month. All sales are on account, with 50 percentcollected during the month of sale, 40 percent during the nextmonth, and 10 percent during the month thereafter. Money can beborrowed and repaid in multiples of $1,000 at an interest rate of12 percent per year. The company desires a minimum cash balance of$3,000 on the first of each month. At the time the principal isrepaid, interest is paid on the portion of principal that isrepaid. All borrowing is at the beginning of the month, and allrepayment is at the end of the month. Money is never repaid at theend of the month it is borrowed.
(a) Prepare a purchases budget for each month of the secondquarter ending June 30, 2014.
| Peyton DepartmentStore Monthly Purchase Budget Quarter Ending June 30, 2014 | ||||
|---|---|---|---|---|
| April | May | June | Total | |
| Budgeted purchases | $Answer | $Answer | $Answer | $Answer |
(b) Prepare a cash receipts schedule for each month of thesecond quarter ending June 30, 2014. Do not include borrowings.
| Peyton DepartmentStore Schedule of Monthly Cash Receipts Quarter Ending June 30, 2014 | ||||
|---|---|---|---|---|
| April | May | June | Total | |
| Total cash receipts | $Answer | $Answer | $Answer | $Answer |
(c) Prepare a cash disbursements schedule for each month of thesecond quarter ending June 30, 2014. Do not include repayments ofborrowings.
| Peyton DepartmentStore Schedule of Monthly Cash Disbursements Quarter Ending June 30, 2014 | ||||
|---|---|---|---|---|
| April | May | June | Total | |
| Total cash disbursements | $Answer | $Answer | $Answer | $Answer |
(d) Prepare a cash budget for each month of the second quarterending June 30, 2014. Include budgeted borrowings andrepayments.
Only use negative signs, if needed, for: excess receiptsover disbursements, balance before borrowings and cash balances(beginning and ending).
| Peyton Department Store Monthly Cash Budget Quarter Ending June 30, 2014 | ||||
|---|---|---|---|---|
| April | May | June | Total | |
| Cash balance, beginning | $Answer | $Answer | $Answer | $Answer |
| Receipts | Answer | Answer | Answer | Answer |
| Disbursements | Answer | Answer | Answer | Answer |
| Excess receipts over disb. | Answer | Answer | Answer | Answer |
| Balance before borrowings | Answer | Answer | Answer | Answer |
| Borrowings | Answer | Answer | Answer | Answer |
| Loan repayments | Answer | Answer | Answer | Answer |
| Cash balance, ending | $Answer | $Answer | $Answer | $Answer |
(e) Prepare an income statement for each month of the secondquarter ending June 30, 2014.
Only use negative signs to show net losses forincome.
| Peyton DepartmentStore Budgeted Monthly Income Statements Quarter Ending June 30, 2014 | ||||
|---|---|---|---|---|
| April | May | June | Total | |
| Sales | $Answer | $Answer | $Answer | $Answer |
| Cost of sales | Answer | Answer | Answer | Answer |
| Gross profit | Answer | Answer | Answer | Answer |
| Operating expenses: | ||||
| Wages and salaries | Answer | Answer | Answer | Answer |
| Depreciation | Answer | Answer | Answer | Answer |
| Utilities | Answer | Answer | Answer | Answer |
| Rent | Answer | Answer | Answer | Answer |
| Insurance | Answer | Answer | Answer | Answer |
| Interest | Answer | Answer | Answer | Answer |
| Total expenses | Answer | Answer | Answer | Answer |
| Net income | $Answer | $Answer | $Answer | $Answer |
(f) Prepare a budgeted balance sheet as of June 30, 2014.
| Peyton DepartmentStore Budgeted Balance Sheet June 30, 2014 | |||
|---|---|---|---|
| Assets | Liabilities andEquity | ||
| Cash | $Answer | Merchandise payable | $Answer |
| Accounts receivable | Answer | Dividend payable | Answer |
| Inventory | Answer | Rent payable | Answer |
| Prepaid insurance | Answer | Loans payable | Answer |
| Fixtures | Answer | Interest payable | Answer |
| Total assets | $Answer | Stockholders' equity | Answer |
| Total liab. & equity | $Answer | ||
