ACCT1501 Study Guide - Quiz Guide: Unsw Business School, University Of New South Wales, Computer Network
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| SIMID SPROTSCOMPANY | ||
| Estimated Balance Sheet | ||
| 21-Dec-13 | ||
| Assets | ||
| Cash | 18,000 | |
| Accounts receivable | 262,500 | |
| Inventory | 75,000 | |
| Total Current Assets | 355,500 | |
| Equipment | 270,000 | |
| Less accumulated dep | 33,750 | 236250 |
| Total Assets | 591,750 | |
| Libalities and Equity | ||
| Accounts Payable | 180,000 | |
| Bank Loan Payable | 7,500 | |
| Taxes payable (due 3.15.2014) | 45,000 | |
| Total Liabiliities | 232,500 | |
| Common Stock | 236,250 | |
| Retained Earnings | 123,000 | |
| Total Stockholders equity | 359,250 | |
| Total Liabilities and equity | 591,750 | |
To prepare a master budget for January, February, and March of2014, management has gathered the following information:
⢠Simid Sportsâ single product is purchased for $30 per unit andresold for $55 per unit. The expected inventory level of 2,500units on December 31, 2013, is more than managementâs desired levelfor 2014 which is 20% of the next monthâs expected sales (inunits). Expected sales are:
o January, 3,500 units;
o February, 4,500 units;
o March, 5,500 units; and
o April, 5,000 units.
⢠Cash sales and credit sales represent 25% and 75%, respectively,of total sales. Of the credit sales, 60% is collected in the firstmonth after the month of sale and 40% in the second month after themonth of sale. For the December 31, 2013, accounts receivablebalance, $62,500 is collected in January and the remaining $200,000is collected in February.
⢠Merchandise purchases are paid for as follows: 20% in the firstmonth after the month of purchase and 80% in the second month afterpurchase. For the December 31, 2013, accounts payable balance,$40,000 is paid in January and the remaining $140,000 is paid inFebruary.
⢠Sales commissions equal to 20% of sales are paid each month.Sales salaries (excluding commissions) are $30,000 per year.
⢠General and administrative salaries are $72,000 per year.Maintenance expense equals $1,000 per month and is paid incash.
⢠Equipment reported in the December 31, 2013, balance sheet waspurchased in January 2013. It is being depreciated over eight yearsusing the straight-line method with no salvage value. The followingamounts for new equipment purchases are planned in the comingquarter: January, $18,000; February, $48,000; and March, $14,400.This equipment will be depreciated using the straight-line methodover eight years with no salvage value. A full monthâs depreciationis taken for the month in which equipment is purchased.
⢠The company plans to acquire land at the end of March at a costof $75,000, which will be paid for with cash on the last day of themonth.
⢠Simid Sports has a working arrangement with its bank to obtainadditional loans as needed. The interest rate is 12% per year, andinterest is paid at each month-end based on the beginning balance.Partial or full payments on these loans can be made on the last dayof the month. The company has agreed to maintain a minimum endingcash balance of $12,500 each month.
⢠The income tax rate for the company is 40%. Income taxes on thefirst quarterâs income will not be paid until April 15.
Using the information in the above document, prepare a masterbudget for each of the first three months of 2014, include thefollowing component budgets (show supporting calculations asneeded, and round amounts to the nearest dollar):
1. Monthlysales budgets (showing both budgeted unit sales and dollarsales)
2. Monthlymerchandise purchases budgets
3. Monthlyselling expense budgets
4. Monthlygeneral and administrative expense budgets
5. Monthlycapital expenditure budgets
6. Monthlycash budgets
7. Budgetedincome statement for the entire first quarter (not for eachmonth)
8. Budgetedbalance sheet as of March 31, 2014.
I have the solution to parts 1-6,but need help with 7 & 8.
