Managerial Accounting – FALL 2020 Master Budget Case Analysis Assignment
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MasterBudgetIndividualproject20204.docxManagerial 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.
a. 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)
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Cash |
$ 6,700 |
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|
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Accounts receivable |
36,900 |
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Inventory |
11,130 |
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|
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Buildings and equipment (net) |
120,000 |
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Accounts payable |
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|
$ 32,880 |
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Common stock |
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|
100,000 |
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Retained earnings |
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|
41,850 |
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$174,730 |
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$174,730 |
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b. Actual and budgeted sales are as follows:
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March (actual) |
$61,500 |
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April |
$79,500 |
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May |
$88,800 |
|
June |
$89,400 |
|
July |
$58,100 |
c. 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.
d. The company’s gross margin percentage is 30% of sales. (In other words, COGs is 70% of sales.)
e. Each month’s ending inventory should equal 20% of the following month's budgeted cost of goods sold.
f. 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.
g. 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.
h. Equipment will be acquired for cash: $3,830 in April and $8,100 in May.
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 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:
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|
April |
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May |
June |
Total |
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Cash sales |
$31,800.00 |
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|
|
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Credit sales |
36,900.00 |
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Total collections |
$68,700.00 |
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2. a. Merchandise purchases budget:
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April |
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May |
June |
Total |
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Budgeted cost of goods |
$55,650.00 |
* |
$62,160.00 |
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Add desired ending inventory |
12,432.00 |
† |
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Total needs |
68,082.00 |
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Less beginning inventory |
11,130.00 |
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Required purchases |
$56,952.00 |
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*$79,500.00 sales × 70% = $55,650.00. |
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†$88,800.00 × 70% × 20% = $12,432.00.
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b. Schedule of expected cash disbursements for merchandise purchases:
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April |
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May |
June |
Total |
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March purchases |
$32,880.00 |
* |
|
|
$32,880.00 |
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April purchases |
14,238.00 |
|
$42,714.00 |
|
56,952.00 |
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May purchases |
0.00 |
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June purchases |
0.00 |
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|
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Total cash disbursements for purchases |
$47,118.00 |
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*Beginning balance of the accounts payable. |
3. Schedule of expected cash disbursements for selling and administrative expenses:
|
|
April |
May |
June |
Total |
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Commissions |
$12,150.00 |
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|
|
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Rent |
2,650.00 |
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|
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Other expenses |
6,360.00 |
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Total cash disbursements for selling and administrative expenses |
$21,160.00 |
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4. Cash budget:
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April |
May |
June |
Total |
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Cash balance, beginning |
$ 6,700.00 |
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Add cash collections |
68,700.00 |
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Total cash available |
75,400.00 |
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Less cash disbursements: |
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For inventory |
47,118.00 |
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For operating expenses |
21,160.00 |
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For equipment |
3,830.00 |
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Total cash disbursements |
72,108.00 |
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Excess (deficiency) of cash |
3,292.00 |
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Financing |
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Etc. |
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5. Prepare a budgeted income statement for the quarter ending June 30.
6. Prepare a balance sheet as of June 30.
© The McGraw-Hill Companies, Inc., 2013. All rights reserved.
7-20 Introduction to Managerial Accounting, 6th edition
