"Wild Wood Company's management asks you to prepare its master budget using the following information. The budget is to cover the months of April, May, and June of 2011.

Wild Wood Company
Balance Sheet
March 31, 2011

Assets                                                

Cash                                50,000        
Accounts receivable          175,000      
Inventory                         126,000      
Total current assets          351,000      
Equipment, gross              480,000      
Accumulated depreciation (90,000)      
Equipment, net                 390,000        
                                                           
Total assets                   741,000          

Liabilities and Equity A

ccounts payable              156,000

Short-term notes payable    12,000

Total current liabilities      168,000

Long-term note payable    200,000

Total liabilities                 368,000

Common stock                  235,000

Retained earnings             138,000

Total stockholders' equity   373,000

Total liabilities and equity  741,000

 

Additional Information:
1) Sales for March total 10,000 units. Each month's sales are expected to exceed the prior month's results by 5%. The product's selling price is $25 per unit.
2) Company policy calls for a given month's ending inventory to equal 80% of the next month's expected unit sales. The March 31 inventory is 8,400 units, which complies with the policy. The purchase price is $15 per unit.
3) Sales representatives' commissions are 12.5% of sales and are paid in the month of the sales. The sales manager's monthly salary will be $3,500 in April and $4,000 per month thereafter.
4) Monthly general and administrative expenses include $8,000 administrative salaries, $5,000 depreciation, and 0.9% monthly interest on the long-term note payable.
5) The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none is collected in the month of the sale).
6) All merchandise purchases are on credit, and no payables arise from any other transactions. One month's purchases are fully paid in the next month.
7) The minimum ending cash balance for all months is $50,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest
payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance.
8) Dividends of $100,000 are to be declared and paid in May.
9) No cash payments for income taxes are to be made during the second calendar quarter. Income taxes will be assessed at 35% in the quarter
10) Equipment purchases of $55,000 are scheduled for June.

REQUIRED
1) Prepare sales budget, including budgeted sales for July
2) Prepare purchases budget, the budgeted cost of goods sold for each month and quarter, and the cost of the June 30 budgeted inventory
3) Prepare the operating expense budget
4) Prepare the budgeted Income Statement
5) Prepare expected cash receipts from customers and the expected June 30 balance of accounts receivable
6) Prepare expected cash payments for purchases and the expected June 30 balance of accounts payable
7) Prepare budgeted cash payments for operating expenses
8) Prepare the cash budget
9) Prepare the budgeted Balance Sheet
10) Prepare the budgeted Statement of Cash Flows

Answer rating: 100% (QA)

Answer 1 Sales budget including budgeted sales for July April May June Sales 10500 11025 11576 2 Purchases budget the budgeted cost of goods sold for each month and quarter and the cost of the June 30 ... View the full answer