Chapter 22: Q9RQ (page 1228)
Why is the sales budget considered the cornerstone of the master budget?
The sales budget estimates the sales revenue in the future.
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Preparing a financial budget—cash budget
You recently began a job as an accounting intern at Reilly Golf Park. Your first task was to help prepare the cash budget for April and May. Unfortunately, the computer with the budget file crashed, and you did not have a backup or even a paper copy. You ran a program to salvage bits of data from the budget file. After entering the following data in the budget, you may have just enough information to reconstruct the budget.
Reilly Golf Park eliminates any cash deficiency by borrowing the exact amount needed from First Street Bank, where the current interest rate is 6% per year. Reilly Golf Park first pays interest on its outstanding debt at the end of each month. The company then repays all borrowed amounts at the end of the month with any excess cash above the minimum required but after paying monthly interest expenses. Reilly does not have any outstanding debt on April 1.
Complete the cash budget. Round interest expense to the nearest whole dollar.
What budgets are included in the financial budget for a merchandising company?
Preparing a financial budget—budgeted income statement and balance sheet
Ballentine Company has the following post-closing trial balance on December 31, 2018:
The company’s accounting department has gathered the following budgeting information for the first quarter of 2019:
Budgeted total sales, all on account $ 305,500 Budgeted direct materials to be purchased and used 40,000 Budgeted direct labor cost 12,500 Budgeted manufacturing overhead costs: Variable manufacturing overhead 2,600 Depreciation 800 Insurance and property taxes 1,100 Budgeted cost of goods sold 71,300 Budgeted selling and administrative expenses: Salaries expense7,000 Rent expense 3,500 Insurance expense 2,000 Depreciation expense 350 Supplies expense 3,055 Budgeted cash receipts from customers 263,500 Budgeted income tax expense 44,000 Budgeted purchase and payment for capital expenditures
(additional equipment) 34,000
Additional information:
a. Direct materials purchases are paid 50% in the quarter purchased and 50% in the next quarter.
b. Direct labor, ma following budgeted income statement manufacturing overhead, selling and administrative costs, and income tax expense are paid in the quarter incurred.
c. Accounts payable at December 31, 2018 are paid in the first quarter of 2019. Requirements
1. Prepare Ballentine Company’s budgeted income statement for the first quarter of 2019.
2. Prepare Ballentine Company’s budgeted balance sheet as of March 31, 2019.
Preparing a financial budget—schedule of cash receipts
Berry expects total sales of \(359,000 in January and \)405,000 in February. Assume that Berry’s sales are collected as follows:
80% in the month of the sale
10% in the month after the sale
6% two months after the sales
4% never collected
November sales totaled \(350,000, and December sales were \)325,000. Prepare a schedule of cash receipts from customers for January and February. Round answers to the nearest dollar.
Using sensitivity analysis in budgeting Riverbed Sporting Goods Store has the following sales budget:
Suppose June sales are expected to be \(81,000 rather than \)65,000. Revise Riverbed’s sales budget.
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