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Managerial Accounting – FALL 2020
Master Budget
Case Analysis Assignment
 
In this assignment you are going to prepare elements of the master budget for Proctor Corporation using the following information. You should prepare individually the answers to the following.  You should have a cover page and type your answers in excel or word.
Cover Page: Your Name
Date of Submission
Course Name
Course Number
Professor Keegan
Content: presented in Excel or Word
This is a quantitative assignment NO critical analysis is necessary
It is taking the place of a Quiz for Chapter 22
 
 
Proctor Corporation, a merchandising company, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of the master budget for the third quarter.
 

  1. As of March 31 (the end of the prior quarter), the company’s balance sheet showed the following account balances: Current quarter to be analyzed is 2nd Quarter (Apr. thru June)

 

Cash $   6,700    
Accounts receivable 36,900    
Inventory 11,130    
Buildings and equipment (net) 120,000    
Accounts payable     $ 32,880
Common stock     100,000
Retained earnings                    41,850
  $174,730   $174,730
       
  1. Actual and budgeted sales are as follows:

 

 March (actual) $61,500
  April $79,500
  May $88,800
  June $89,400
  July $58,100

 

  1. Sales are 40% for cash and 60% on credit. All payments on credit sales are collected in the month following the sale. The accounts receivable at March 31 are a result of March credit sales.

 

  1. The company’s gross margin percentage is 30% of sales. (In other words, COGs is 70% of sales.)

 

  1. Each month’s ending inventory should equal 20% of the following month’s budgeted cost of goods sold.
  2. One-quarter of a month’s inventory purchases is paid for in the month of purchase; the other three-quarters are paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory.

 

  1. Monthly expenses are as follows: commissions, $12,150; rent, $2,650; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $2,550 for the quarter and includes depreciation on new assets acquired during the quarter.

 

  1. Equipment will be acquired for cash: $3,830 in April and $8,100 in May.

 

  1. Management would like to maintain a minimum cash balance of $5,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month (if needed to maintain the $5,000 cash balance), The company can borrow up to a total loan balance of $50,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

 
 
Required:
Using the data above, complete the following statements and schedules for the second quarter:
 

  1. Schedule of expected cash collections:

 

  April   May June Total
Cash sales $31,800.00        
Credit sales  36,900.00                                               
Total collections $68,700.00                                               
           
  1. a. Merchandise purchases budget:

 

  April   May June Total  
Budgeted cost of goods $55,650.00 * $62,160.00      
Add desired ending inventory  12,432.00 †        
Total needs 68,082.00          
Less beginning inventory   11,130.00                                                 
Required purchases $56,952.00                                                 
 
*$79,500.00 sales × 70% = $55,650.00.
†$88,800.00 × 70% × 20% = $12,432.00.
 
 
 
 
 
 
 
 

 

  1. Schedule of expected cash disbursements for merchandise purchases:

 

  April   May June Total
March purchases $32,880.00 *     $32,880.00
April purchases 14,238.00   $42,714.00   56,952.00
May purchases 0.00        
June purchases           0.00                                               
Total cash disbursements for purchases $47,118.00                                               
 
*Beginning balance of the accounts payable.

 

  1. Schedule of expected cash disbursements for selling and administrative expenses:

 

  April May June Total
Commissions $12,150.00      
Rent 2,650.00      
Other expenses     6,360.00                                             
Total cash disbursements for selling
and administrative expenses		  
$21,160.00		                                             
         
  1. Cash budget:

 

  April May June Total
Cash balance, beginning $  6,700.00      
Add cash collections  68,700.00                                             
Total cash available  75,400.00                                             
Less cash disbursements:        
                For inventory 47,118.00      
                For operating expenses 21,160.00      
                For equipment    3,830.00                                             
Total cash disbursements  72,108.00                                             
Excess (deficiency) of cash 3,292.00      
Financing        
Etc.        

 

  1. Prepare a budgeted income statement for the quarter ending June 30.

 

  1. Prepare a balance sheet as of June 30.