Requirement: Complete the various budget schedules usingExcel.
The Distribution Center of 123 Oil and Gas Company wants amaster budget for the next three months, beginning January 1st. Itdesires an ending minimum cash balance of $4,000 each month. Salesare forecasted at an average selling price/transfer price of $4 perwidget. In January, the Distribution Centre is beginningjust-in-time deliveries from suppliers, which means that purchasesequal expected sales. The December 31 inventory balance will bedrawn down to $5,000, which will be the desired ending inventorythereafter. Purchase price per widget is $2. Purchases during anygiven month are paid in full during the following month. All salesare on credit, payable within thirty days, but experience has shownthat 60 percent of current sales are collected in the currentmonth, 30 percent in the next month, and 10 percent in the monththereafter. Bad debts are negligible. The Distribution Centre sellsto related sister corporations as well as outside/external sales.The following are some of the expenses for the DistributionCentre:
Wages and salaries $12000/month Insurance expired 100/monthDepreciation 200/month Miscellaneous 2000/month
Rent 200/month + 10% of quarterly sales over $10,000
Cash dividends of $1,000 are to be paid quarterly, beginningJanuary 15, and are declared on the fifteenth of the previousmonth. All operating expenses are paid as incurred, exceptinsurance, depreciation, and rent. Rent of $200 is paid at thebeginning of each month and the additional 10 percent of sales ispaid quarterly on the tenth of the month following the quarter. Thenext settlement is due January 10.
The company plans to buy some new office fixtures for $2,000cash in March. To the distribution company this will be considereda capital purchase.
Money can be borrowed and repaid in multiples of $500, at aninterest rate of 12 percent per annum. Management wants to minimizeborrowing and repay rapidly. Interest is computed and paid when theprincipal is repaid. Assume that borrowing takes place at thebeginning, and repayment at the end, of the months in question.Money is never borrowed at the beginning and repaid at the end ofthe same month. Compute interest to the nearest dollar.
ASSETS AS OF
DECEMBER 31,
Cash $4,000 Accounts receivable 16,000 Inventory* 31,250 Prepaidinsurance 1,200 Fixed assets, net 10,000
Total $62,450
LIABILITIES AS OF DECEMBER 31,
Accounts payable (merchandise) $28,750 Dividends payable $1,000Rent Payable $6,000
Total $35,750
*November 30 inventory balance = $12,500
Recent and forecasted sales:
October $30,000 December $20,000 November $20,000 January$50,000 February $60,000 March $30,000 April $36,000
Required
Prepare a master budget for the following schedules identifiedbelow. Use Excel and incorporate a formula based spread sheetwhenever possible. I will be altering the sales figures in yoursubmitted Excel spread sheet to test your formulas.
Work Sheet/Template Cash Collections Schedule
| January | February | March |
60% of current months sale | | | |
30% of previous months sale | | | |
10% of second previous months sale | | | |
Total collections | | | |
Purchase Budget
| December | January | February | March |
Desired Ending Inventory | | | | |
Cost of Goods Sold | | | | |
Total Needed | | | | |
Beginning Inventory | | | | |
Purchases | | | | |
Statement of Cash Receipts and Disbursements
| January | February | March |
Cash Balance Beginning | | | |
Plus Cash Collections | | | |
=Cash Available Before Financing | | | |
Less Cash Disbursements: | | | |
Purchases | | | |
Rent | | | |
Wage and Salaries | | | |
Miscellaneous Expenses | | | |
Dividends | | | |
Purchase of Fixtures | | | |
Total Disbursements | | | |
Plus Minimum Cash Desired | | | |
Total Cash Needed | | | |
Excess (Deficiency) | | | |
Financing: | | | |
Borrowing, at the beginning of period | | | |
Repayment, at the end of period | | | |
Interest at 12% per annum | | | |
Cash Balance, end | | | |
Income Statement for the 3 months ending March 31
Sales | |
Less Cost of Goods Sold | |
=Gross Profit | |
Less Operating Expenses: | |
? | |
? | |
? | |
? | |
? | |
Net Income from Operations | |
Interest Expense | |
Net Income | |
Balance Sheet as of March 31:
Assets | |
Current Assets: | |
Cash | |
Accounts Receivable | |
Inventory | |
Prepaid | |
Fixed Assets | |
Total Assets | |
Liabilities: | |
Accounts Payable | |
Rent Payable | |
Dividend Payable | |
Shareholders’ Equity | |
Retained Earnings and Share Capital | |
