McCarty Pointers Corporation expects to begin operations on January 1,2012; it will operate as a specialty sales company that sells laser pointers over the internet. McCarty expects sales in January 2012 to total $200,000 and to increase 10 percent per month in February and March. All sales are on account. McCarty expects to collect 70 percent of accounts receivable in the month of sale, 20 percent in the month following the sale, and 10 percent in the second month following the sale.
Required
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Get Help Now!a. Prepare a sales budget for the first quarter of 2012.
b. Determine the amount of sales revenue McCarty will report on the first 2012 quarterly proforma income statement.
c. Prepare a cash receipts schedule for the first quarter 2012.
d. Determine the amount of accounts receivable as March 31, 2012.
Problem 7-21A Preparing budgets with multiple products
Hammond Fruits Corporation wholesales peaches and oranges. Lashanda King is working with the company’s accountant to prepare next year’s budget. Ms. King estimates that sales will increase 5 percent for peaches and 10 percent for oranges. The current year’s sales revenue data follow.( look on the excel spead sheet)
Based on company’s past experience, cost of goods sold is usually 60 percent of sales revenue. Company policy is to keep 10 percent of the next period’s estimated cost of goods sold as the current period’s ending inventory. (hint: Use cost of goods sold for the first quarter to determine the beginning inventory for the first quarter.)
Required
a. Prepare the company ‘s sales budget for the next for each quarter by individual product.
b. If the selling and administrative expenses are estimated to be $700,000, prepare the company’s budgeted annual income statement.
c. Ms. King estimates next year’s ending inventory will be $34,000 for peaches and $56,000 for oranges. Prepare the company’s inventory purchases budgets for the next year showing quarterly figures by product.
McCARTY POINTERS CORPORATION
a.
Sales Budget
January
February
March
Total
Sales on Account
b.
Sales revenue for Quarter
c. and d.
McCARTY POINTERS CORPORATION
Schedule of Cash Receipts
January
Receipts from January Sales
Receipts from January Sales
Receipts from January Sales
Receipts from February Sales
Receipts from February Sales
Receipts from February Sales
Receipts from March Sales
Receipts from March Sales
Receipts from March Sales
Total
Accounts receivable March 31
February
March
April
May
Given Data P07-16A:
McCARTY POINTERS CORPORATION
Expected sales in January
Growth rates for February and March
Accounts receivable collected:
Month of sale
Month following sale
Second month following sale
$200,000
0.1
0.7
0.2
0.1
Student Name:
Class:
Problem 07-21A
HAMMOND FRUITS CORPORATION
a. Sales Budget
Sales in Next Year
Peaches
Oranges
Total
b.
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
HAMMOND FRUITS CORPORATION
Budgeted Annual Income Statement
Sales Revenue
Cost of Goods Sold
Gross Profit
Selling and Admin. Expenses
Net Income
c.
HAMMOND FRUITS CORPORATION
Inventory Purchases Budget
Peaches
Sales
Cost of Goods Sold
Plus: Desired Ending Inventory
Inventory Needed
Less: Beginning Inventory
Required Purchases
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Oranges
Sales
Cost of Goods Sold
Plus: Desired Ending Inventory
Inventory Needed
Less: Beginning Inventory
Required Purchases
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Total
Given Data P07-21A:
HAMMOND FRUITS CORPORATION
Expected annual sales growth rate:
Peaches
Oranges
Sales in Current Year
Peaches
Oranges
Total
Additional Information:
Cost of goods sold – percentage
of sales revenue
Ending inventory – percentage of
next period’s cost of goods sold
Part b. – Estimated selling and
administrative expenses
Part c. – Estimate of ending
inventory for next year:
Peaches
Oranges
0.05
0.1
1st Quarter
$220,000
400,000
$620,000
0.6
0.1
$700,000
$34,000
$56,000
2nd Quarter
$240,000
450,000
$690,000
3rd Quarter
$300,000
570,000
$870,000
4th Quarter
$240,000
380,000
$620,000
Total
$1,000,000
1,800,000
$2,800,000
Student Name:
Class:
Problem 07-22A
PATEL COMPANY
a. Sales Budget
Cash Sales
Sales on Account
Total Budgeted Sales
October
November
December
Pro Forma
b. Schedule of Cash Receipts
Current Cash Sales
Plus Collections from A/R
Total Collections
October
November
December
Pro Forma
October
November
December
Pro Forma
Data
October
November
December
Pro Forma
Data
October
November
December
Pro Forma
Data
October
November
December
Pro Forma
Data
October
November
December
Pro Forma
Data
c. Inventory Purchases Budget
Budgeted Cost of Goods Sold
Plus Desired Ending Inventory
Inventory Needed
Less Beginning Inventory
Required Purchases (on Acct.)
d. Schedule of Cash Payments Budget for Inventory Purchases
Payment for Current Month’s A/P
Payment for Prior Month’s A/P
Total Budgeted Payments
e. Selling and Administrative Expense Budget
Salary Expense
Sales Commissions
Supplies Expense
Utilities
Depreciation on Store Fixture
Rent
Miscellaneous
Total S&A Expenses
f. Schedule of Cash Payments of S&A Expenses
Salary Expense
Prior Month Sales Commissions
Supplies Expense
Prior Month Utilities
Depreciation on Store Equipment
Rent
Miscellaneous
Total Payments for S&A Expenses
g. Cash Budget
Beginning Cash Balance
Add Cash Receipts
Cash Available
Less Payments
For Inventory Purchases
For S&A Expenses
Purchase of Store Fixtures
Interest Expense
Total Budgeted Payments
Payment Minus Receipts
Surplus (Shortage)
Financing Activity
Borrowing (Repayment)
Ending Cash Balance
h.
PATEL COMPANY
Pro Forma Income Statement
For the Quarter Ended December 31, 2009
Sales Revenue
Cost of Goods Sold
Gross Margin
S&A Expenses
Operating Income
Interest Expense
Net Income
i.
PATEL COMPANY
Pro Forma Balance Sheet
December 31, 2009
Assets
Cash
Accounts Receivable
Inventory
Store Equipment
Accumulated Depreciation
Book Value of Equipment
Total Assets
Liabilities
Accounts Payable
Utilities Payable
Sales Commissions Payable
Line of Credit Liability
Equity
Retained Earnings
Total Liabilities and Equity
j.
PATEL COMPANY
Pro Forma Statement of Cash Flows
For the Quarter Ended December 31, 2009
Cash Flow from Operating Activities
Cash Receipts from Customers
Cash Payments for Inventory
Cash Payments for S&A Expenses
Cash Payments for Interest Expense
Net Cash Flow from Operating Activities
Cash Flow from Investing Activities
Cash Payment for Store Fixtures
Cash Flow from Financing Activities
Net Inflow from Line of Credit
Net Increase in Cash
Plus Beginning Cash Balance
Ending Cash Balance
Given Data P07-22A:
PATEL COMPANY
Part a.
October sales
Sales in cash
Sales in accounts receivable
Expected sales growth per month
Part b.
Accounts receivable collected in
month following sales
Part c.
Cost of goods sold as percentage
of sales
Ending inventory – percent of next
month’s cost of goods sold
December estimated ending inventory
Part d.
Accounts payable paid in month
of purchase
Accounts payable paid in month
following purchase
Part e.
Salary expense (fixed)
Sales commissions (percent of sales)
Supplies expense (percent of sales)
Utilities (fixed)
Depreciation on store equipment (fixed)
Rent (fixed)
Miscellaneous (fixed)
Cost of store fixtures
Salvage value – store fixtures
Useful life (years) – store fixtures
Part g.
Borrowing increments
Monthly interest rate
Cash cushion
$120,000
0.4
0.6
0.25
1
0.6
0.1
$12,000
0.7
0.3
$18,000
0.05
0.02
$1,400
4,000
4,800
1,200
164,000
20,000
3
$1,000
0.01
$12,000
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