ACC 2234 Learning Activities - Lesson 3 Problem 1 Completing a Master Budget The following data relate to the operations of Soper Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash .$8,000 Accounts receivable Inventory Building and equipment, net. Accounts payable Common shares $ 20,000 .$ 36,000 .$120,000 .$ 21,750 .$150,000 Retained earnings ..$ 12,250 a. The gross margin is 25% of sales. b. Actual and budgeted sales data: March (actual). April May... .$50,000 ...$60,000 .$72,000 .$90,000 June July... .$48,000 c. Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales. d. Each month's ending inventory should equal 80% of the following month's budgeted cost of goods sold. e. One-half of a month's inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory. f. Monthly expenses are as follows: commissions, 12% of sales; rent, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $900 per month (includes depreciation on new assets). g. Equipment costing $1,500 will be purchased for cash in April. h. The company must maintain a minimum cash balance of $4,000. An open line of credit is available at a local bank. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month; borrowing must be in multiples of $1,000. The annual interest rate is 12%. Interest is paid only at the time of repayment of principal; calculate interest on whole months (1/12, 2/12, and so forth).