Purpose To use Excel, a common tool used for budgeting, to prepare components of the master budget. To build a cash budget from its components.
Instructions
Using the prior year ending balance sheet and budget information below create a three month budget in the worksheets provided. Review the balance sheet and thoroughly read the budget information before you proceed. The letters in the budget information and assumptions correspond to the required budgets, some budgets use the same information. In the budget data assumptions some items refer you to the balance sheet. Use cell referencing to replace "Refer to the balance sheet" with the amount. Use cell referencing and formulas for all data input and calculations.
Required:
In the worksheet Budget and Cash components complete the following
1. Monthly sales budgets.
2. Monthly merchandise purchases budgets.
3. Monthly selling expense budgets.
4. Cash receipts budget
5. Cash payments for merchandise
6. Monthly cash budgets.
TARS Computer Corporation Estimated Balance Sheet 12/31/19 Assets Liabilities and Equity Cash $ 35,000 Accounts payable $ 345,000 Accounts receivable 520,000 Bank loan payable 11,000 Inventory 95,000 Taxes payable (due 3/15/2020) 88,000 Total current assets $ 650,000 Total liabilities Equipment 612,000 Common Stock 472,000 Less: accumulated dep 76,500 Retained earnings 269,500 Equipment, net 535,500 Total stockholders' equity Total assets $ 1,185,500 Total liabilities and equity $ 444,000 741,500 $ 1,185,500 Budget information a. The company's single product is purchased for $20 per unit and resold for $57 per unit. The expected inventory level of 4,750 units on December 31, 2019, is more than management's desired level, which is 20% of the next month's expected sales (in units). Expected sales are January, 6,500 units; February, 9,000 units; March, 10,500 units; and April, 9,500 units. b. Cash sales and credit sales represent 25% and 75%, respectively, of total sales. Of the credit sales, 63% is collected in the first month after the month of sale and 37% in the second month after the month of sale. For the December 31, 2019, accounts receivable balance, 63% is collected in January 2020 37% in February 2020. C. Merchandise purchases are paid for as follows: 20% in the first month after the month of purchase and 80% in the second month after the month of purchase. For the December 31, 2019 the accounts payable balance 20% is paid in January and the remaining 80% is paid in d. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $84,000 per year. e. General and administrative salaries are $12,000 per month. Maintenance expense equals $2,000 per month and is paid in cash. f. he following amounts for new equipment purchases are planned in the coming quarter: January, $31,200; February, $98,400; and March, $21,600. g. The company plans to buy land at the end of March at a cost of $175,000, which will be paid with cash on the last day of the month. h. The company has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and interest is paid at each month-end based on the beginning balance. Partial or full payments on these loans can be made on the last day of the month. The company has agreed to maintain a minimum ending cash balance of $50,000 at the end of each month. i. The income tax rate for the company is 21%. Income taxes on the first quarter's income will not be paid until April 15. The taxes payable from the prior year is 88,000 and will be paid 3/15/2020