The treasurer of Gateway Co. has accumulated the following budget information for the first two months of the coming year: March $450,000 290,000 41,400 250,000 45,000 51,000 121,500 April $520,000 350,000 46,400 Sales Inventory costs Operating expenses Capital expenditures March 1 Cash balance Accounts Receivables-March 1 Accounts Payable-March 1 ($102,000 for inventory purchases and $19,500 for operating expenses) The company expects to sell about 35% of sales for cash. Of sales on account, 80% are expected to be collected in full in the month of the sale and the remainder in the month following the sale. One fourth of the inventory costs are expected to be paid in the month in which they are incurred and the other three fourths in the month following. Depreciation, insurance, and property taxes represent $6,400 of the total budgeted monthly operating expenses. Insurance is paid in February and a $40,000 installment on property taxes is expected to be paid in April. Of the remainder of the operating expenses, one half are expected to be paid in the month in which they are incurred and the balance in the following month. Capital expenditures of $250,000 are expected to be paid in March. Management desires to maintain a minimum cash balance of $35,000. Any borrowings would be paid off in the next month. Interest would not be paid until after April. REQUIRED: Prepare a monthly cash budget in good form for the month of March and the related schedules shown below. Show all calculations clearly to receive full marks. a) Schedule of Cash collections for the month of March b) Schedule of Cash disbursements for March Inventory purchases c) Schedule of Cash disbursements for Operating expenses-Month of March
The treasurer of Gateway Co. has accumulated the following budget information for the first two months of the coming year: March $450,000 290,000 41,400 250,000 45,000 51,000 121,500 April $520,000 350,000 46,400 Sales Inventory costs Operating expenses Capital expenditures March 1 Cash balance Accounts Receivables-March 1 Accounts Payable-March 1 ($102,000 for inventory purchases and $19,500 for operating expenses) The company expects to sell about 35% of sales for cash. Of sales on account, 80% are expected to be collected in full in the month of the sale and the remainder in the month following the sale. One fourth of the inventory costs are expected to be paid in the month in which they are incurred and the other three fourths in the month following. Depreciation, insurance, and property taxes represent $6,400 of the total budgeted monthly operating expenses. Insurance is paid in February and a $40,000 installment on property taxes is expected to be paid in April. Of the remainder of the operating expenses, one half are expected to be paid in the month in which they are incurred and the balance in the following month. Capital expenditures of $250,000 are expected to be paid in March. Management desires to maintain a minimum cash balance of $35,000. Any borrowings would be paid off in the next month. Interest would not be paid until after April. REQUIRED: Prepare a monthly cash budget in good form for the month of March and the related schedules shown below. Show all calculations clearly to receive full marks. a) Schedule of Cash collections for the month of March b) Schedule of Cash disbursements for March Inventory purchases c) Schedule of Cash disbursements for Operating expenses-Month of March
Chapter8: Budgets And Bank Reconciliations
Section: Chapter Questions
Problem 4.1C
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Concept explainers
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Transcribed Image Text:The treasurer of Gateway Co. has accumulated the following budget information for the first two
months of the coming year:
March
$450,000
290,000
41,400
250,000
45,000
51,000
121,500
April
$520,000
350,000
46,400
Sales
Inventory costs
Operating expenses
Capital expenditures
March 1 Cash balance
Accounts Receivables-March 1
Accounts Payable-March 1
($102,000 for inventory purchases and
$19,500 for operating expenses)
The company expects to sell about 35% of sales for cash. Of sales on account, 80% are
expected to be collected in full in the month of the sale and the remainder in the month following
the sale.
One fourth of the inventory costs are expected to be paid in the month in which they are
incurred and the other three fourths in the month following.
Depreciation, insurance, and property taxes represent $6,400 of the total budgeted monthly
operating expenses. Insurance is paid in February and a $40,000 installment on property taxes
is expected to be paid in April. Of the remainder of the operating expenses, one half are
expected to be paid in the month in which they are incurred and the balance in the following
month. Capital expenditures of $250,000 are expected to be paid in March.
Management desires to maintain a minimum cash balance of $35,000. Any borrowings would
be paid off in the next month. Interest would not be paid until after April.
REQUIRED: Prepare a monthly cash budget in good form for the month of March and the
related schedules shown below. Show all calculations clearly to receive full marks.
a) Schedule of Cash collections for the month of March
b) Schedule of Cash disbursements for March Inventory purchases
c) Schedule of Cash disbursements for Operating expenses-Month of March
Gateway Company
Cash Budget
Month of March
d)
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