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Sturgeon Industries $-$ Q$3$ Budget, $2024$

The following information has been assembled to assist in preparing a master budget for Sturgeon

Industries for the third quarter of $2024,$ July through September.

At June $30,$ the company's general ledger account balances were:

a$.$ Actual sales for June and budgeted sales for the next four months are as follows:

b$.40\%$ of sales are for cash. All payments on credit sales are collected in the month following the sale.

c$.$ The gross margin is $30\%$ of sales.

d$.$ Each month's ending inventory should equal $20\%$ of the following month's budgeted cost of goods sold.

e$.$ One$-$quarter of each month's inventory purchases is paid for in the month of purchase; the balance

due is paid for in the following month.

f$.$ Monthly cash expenses include commissions, $$12,000$; rent, $$1,800$; other expenses $($excluding

depreciation$),8\%$ of sales.

g$.$ Depreciation is calculated quarterly, in the last month of each quarter. For Q$3,2024,$ total

depreciation is $$2,400.$ This amount includes depreciation on new assets acquired during the quarter.

h$.$ Equipment will be purchased for cash in July for $$3,000$ and in August for $$4,000.$

i$.$ 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 it to borrow up to a total loan balance

of $$10,000.$ Borrowings and repayments of principal must be in multiples of $$1,000.$ When required,

borrowing occurs at the beginning of the month and repayment is done at the end of the month.

Interest is paid only at the time of payment of principal. The annual interest rate is $12\%.$ It is not

compounded. $($Calculate interest on whole months, for example $\frac{1}{12},\frac{2}{12}.)$

Required: Use the budget example on pages $362$ through $368$ as an example

Complete a full set of budgets, including schedule of expected cash collections, inventory purchase

budget, schedule of expected cash payments for inventory purchases, schedule of cash payments

for operating expenses, cash budget.

Prepare a projected income statement for the third quarter of $2024$ and prepare a projected

balance sheet for the end of the third quarter.

It is done on excel

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