Demo_WP Chapter 7

# Demo_WP Chapter 7 - Demo Chapter 7 Budgeting Chang...

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Demo Chapter 7 Budgeting Chang Distributors, a wholesale company, is considering whether to open a new distribution center. The center would open January 1, 2012. To make the decision, the planning committee requires a master budget for the center’s first quarter of operation (January, February, and March of 2012). Required You are to construct the first quarter master budget based on the following expectations: a. January sales are estimated to be \$400,000 of which \$100,000 will be cash and \$300,000 will be credit. The company expects sales to grow 10% per month. Prepare a sales budget. b. The company expects to collect 100% of accounts receivable in the month following the sale. Prepare a schedule of expected cash receipts. c. Use the information developed in requirements a and b to determine the amount of accounts receivable on the March 31 pro forma balance sheet and the amount of sales on the first quarter pro forma income statement. a. b. c. Sales Budget, Schedule of Cash Receipts, Pro Forma Data Estimated Sales Growth Rate 10% per month Sales Budget Pro Forma PROJECTED SALES Jan Feb Mar Stmt. Data Cash Sales (25%) 100,000 Sales on Account (75%) 300,000 (a) Total Budgeted Sales 400,000 (b) SCHEDULE OF CASH RECEIPTS Current Month’s Cash Sales 100,000 + 100% of Previous Month's A/R 0 Total Budgeted Cash Collections 100,000 (a) Accounts receivable balance on March 31 pro forma balance sheet. (b) Sales revenue on first quarter pro forma income statement (sum of monthly sales). 1

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d. Cost of goods sold will be 60% of sales. Company policy is to budget an ending inventory balance equal to 25% of the next month’s projected cost of goods sold. Assume Chang expects April cost of goods sold to be \$314,000. Prepare an inventory purchases budget. e. All inventory purchases are on account. The company pays 70% of accounts payable in the month of purchase. It pays the remaining 30% in the following month. Prepare a schedule of expected cash payments for inventory purchases. f.
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## This note was uploaded on 02/22/2012 for the course BUAD 2050 taught by Professor Nicholasw.schroeder during the Spring '09 term at Toledo.

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Demo_WP Chapter 7 - Demo Chapter 7 Budgeting Chang...

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