The management of Rapid Hardware has asked you to prepare a master budget for the months of
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Question:
The management of Rapid Hardware has asked you to prepare a master budget for the months of April, May and June for the entity using the following information.
Statement of Financial Position as at March
ASSETS Cost $ Depreeciation $ Net book value $
Equipment
Current assets
Inventory
Accounts Reveivable
Cash
LIABILITIES $ SHAREHOLDERS EQUITY
Equity
Ordinary shares
Retained Earnings
Noncurrent Liabilities
Longterm note payable
Current liabilities
Accounts payable
shortterm notes payable
The following details were also available:
a actual units of sales for March were units and each months sales are expected to exceed the prior months results by The selling price for each unit is $
b The policy of Rapid Hardware for ending inventory of a given month is to be equal to of the next months expected sales. The March inventory was units based on this policy.
c Sales representatives commissions are and they are paid in the month of the sales. The managers salaries will be $ in April and $ for each month thereafter.
d The general and administrative expenses include administrative salaries of $ per month, depreciation of $ per month and monthly interest on the long term note payable.
e of the sales are expected to be for cash. Receivables are collected in full in the month following the sale.
f All purchases are on credit and no payable arise from any other transactions. Purchases are paid for in the next month. The purchase price is $ per unit.
g The minimum ending cash balance for all the months is $ and if necessary, the company will borrow enough cash to reach this target. The shortterm notes will require an interest payment of at the end of each month. If the ending cash balance exceeds the minimum, the excess will be applied to repaying the shortterm notes payable.
h Dividends of $ are to be declared and paid in May.
i No cash payments for income taxes are to be made during the second quarter. Income taxes will be assessed at in the quarter.
j Equipment purchases of $ are to be scheduled for June.
You are required to prepare the following budgets and other financial information in order to assist you to complete the master budget:
Sales budget, including that for July.
The purchases budget to include the budgeted cost of goods sold for each month and the quarter as well as the cost of the June budgeted inventory.
The selling expense budget.
The general and administrative expense budget
The budget for expected cash receipts from customers and the expected June accounts receivable balance.
The budget for expected cash payments for purchases and the expected June balance for accounts payable.
The cash budget for the quarter.
the budgeted retained earnings statement.
Related Book For
Fundamentals of Financial Accounting
ISBN: 978-0078025914
5th edition
Authors: Fred Phillips, Robert Libby, Patricia Libby
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