A's only managerial accounting question.

Nordic Company, 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 second quarter.

a.

As of March 31 (the end of the prior quarter), the company’s balance sheet showed the following account balances:

  Cash

$

9,000     

  Accounts receivable

48,000     

  Inventory

12,600     

  Buildings and equipment (net)

214,100     

  Accounts payable

$

18,300    

  Capital stock

190,000    

  Retained earnings

75,400    

$

283,700     

$

283,700    

b.

Actual sales for March and budgeted sales for April–July are as follows:

  March (actual)

 $60,000   

  April

$70,000   

  May

$85,000   

  June

$90,000   

  July

$50,000   

c.

Sales are 20% for cash and 80% 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 40% of sales. (In other words, cost of goods sold is 60% of sales.)

e.

Monthly selling and administrative expenses are budgeted as follows: salaries and wages, $7,500 per month; shipping, 6% of sales; advertising, $6,000 per month; other expenses, 4% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $6,000 for the quarter.

f.

Each month’s ending inventory should equal 30% of the following month’s cost of goods sold.

g.

Half of a month’s inventory purchases are paid for in the month of purchase and half in the following month.

h.

Equipment purchases during the quarter will be as follows: April, $11,500; and May, $3,000.

i.

Dividends totaling $3,500 will be declared and paid in June.

j.

Management wants to maintain a minimum cash balance of $8,000. 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, up to a total loan balance of $20,000. 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: (Omit the "$" sign in your response.)

Schedule of expected cash collections

April

May

June

Total

  Cash sales

$ 14,000     

$     

$     

$     

  Credit sales

48,000     

  Total collections

$ 62,000     

$     

$     

$     

2a.

Merchandise purchases budget. (Input all amounts as positive values. Omit the "$" sign in your response.)

Merchandise purchases budget

April

May

June

Total

  Budgeted cost of goods sold

$ 42,000

*

$ 51,000    

$     

$     

  : desired ending inventory

15,300

†

  Total needs

57,300

  : beginning inventory

12,600

  Required purchases

$ 44,700

$     

$     

$     

*$70,000 sales × 60% = $42,000.

†$51,000 × 30% = $15,300.

2b.

Schedule of expected cash disbursements for merchandise purchases: (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Schedule of cash disbursements for purchases

April

May

June

Total

  For March purchases

$ 18,300  

$   

$   

$ 18,300  

  For April purchases

22,350  

22,350  

44,700  

  For May purchases

  For June purchases

  Total cash disbursements      for purchases

$ 40,650  

$   

$   

$   

3.

Schedule of expected cash disbursements for selling and administrative expenses: (Omit the "$" sign in your response.)

Schedule of cash disbursements for selling and administrative expenses

April

May

June

Total

  Salaries and wages

$ 7,500     

$   

$   

$   

  Shipping

4,200     

  Advertising

6,000     

  Other expenses

2,800     

  Total cash disbursements for selling   and administrative expenses

$20,500     

$   

$   

$   

4.

Cash budget. (Input all amounts as positive values except cash deficiency, repayments and interest which should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Nordic Company

Cash budget

April

May

June

Total

  Cash balance, beginning

$ 9,000    

$    

$    

$    

  Add cash collections

62,000    

  Total cash available

71,000    

  Less cash disbursements:

     For inventory purchases

40,650    

     For selling and administrative expenses

20,500    

     For equipment purchases

11,500    

     For dividends

  Total cash disbursements

72,650    

  Excess (deficiency) of cash

(1,650)   

  Financing:

     Borrowings

     Repayments

     Interest

  Total financing

  Cash balance, ending

$     

$    

$    

$    

5.

Prepare an absorption costing income statement for the quarter ending June 30. (Input all amounts as positive values. Omit the "$" sign in your response.)

Nordic Company Income Statement For the Quarter Ended June 30

$   

  Cost of goods sold:

$   

  Selling and administrative expenses:

$   

6.

Prepare a balance sheet as of June 30. (Be sure to list the assets and liabilities in order of their liquidity. Omit the "$" sign in your response.)

Nordic Company Balance Sheet June 30

Assets

  Current assets:

$   

  Total current assets

 Total assets

$   

Liabilities and Stockholders’ Equity

  Current liabilities:

$   

  Stockholders' equity:

$   

  Total liabilities and stockholders’ equity

$