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(solution) Accounting Principles II Master Budget Project Wild Wood


Accounting Principles II
Master Budget Project
Wild Wood Company's management asks you to prepare its master budget using the following information.
The budget is to cover the months of April, May, and June of 2011.
Wild Wood Company
Balance Sheet
 March 31, 2011
Assets Liabilities and Equity
Cash 50,000 Accounts payable 156,000
Accounts receivable 175,000 Short-term notes payable 12,000
Inventory 126,000 Total current liabilities 168,000
Total current assets 351,000 Long-term note payable 200,000
Equipment, gross 480,000 Total liabilities 368,000
Accumulated depreciation -90,000 Common stock 235,000
Equipment, net 390,000 Retained earnings 138,000
Total stockholders' equity 373,000
Total assets 741,000 Total liabilities and equity 741,000
Additional Information:
1) Sales for March total 10,000 units.  Each month's sales are expected to exceed the prior month's 
results by 5%.  The product's selling price is $25 per unit.
2) Company policy calls for a given month's ending inventory to equal 80% of the next month's 
expected unit sales.  The March 31 inventory is 8,400 units, which complies with the policy.
The purchase price is $15 per unit.
3) Sales representatives' commissions are 12.5% of sales and are paid in the month of the sales.  The
sales manager's monthly salary will be $3,500 in April and $4,000 per month thereafter.
4) Monthly general and administrative expenses include $8,000 administrative salaries, $5,000
depreciation, and 0.9% monthly interest on the long-term note payable.
5) The company expects 30% of sales to be for cash and the remaining 70% on credit.  Receivables
are collected in full in the month following the sale (none is collected in the month of the sale).
6) All merchandise purchases are on credit, and no payables arise from any other transactions.  One
month's purchases are fully paid in the next month.
7) The minimum ending cash balance for all months is $50,000.  If necessary, the company borrows
enough cash using a short-term note to reach the minimum.  Short-term notes require an interest
payment of 1% at each month-end (before any repayment).  If the ending cash balance exceeds 
the minimum, the excess will be applied to repaying the short-term notes payable balance.
8) Dividends of $100,000 are to be declared and paid in May.
9) No cash payments for income taxes are to be made during the second calendar quarter.  Income
taxes will be assessed at 35% in the quarter
10) Equipment purchases of $55,000 are scheduled for June.
REQUIRED
1) Prepare sales budget, including budgeted sales for July
2) Prepare purchases budget, the budgeted cost of goods sold for each month and quarter, and the
cost of the June 30 budgeted inventory
3) Prepare the operating expense budget
4) Prepare the budgeted Income Statement
5) Prepare expected cash receipts from customers and the expected June 30 balance of accounts
receivable
6) Prepare expected cash payments for purchases and the expected June 30 balance of accounts
payable
7) Prepare budgeted cash payments for operating expenses
8) Prepare the cash budget
9) Prepare the budgeted Balance Sheet
10)

Prepare the budgeted Statement of Cash Flows


Accounting Principles II

 

Master Budget Project

 

Wild Wood Company's management asks you to prepare its master budget using the following information.

 

The budget is to cover the months of April, May, and June of 2011.

 

Wild Wood Company

 

Balance Sheet

 

March 31, 2011

 

Assets

 

Cash

 

Accounts receivable

 

Inventory

 

Total current assets

 

Equipment, gross

 

Accumulated depreciation

 

Equipment, net 50,000

 

175,000

 

126,000

 

351,000

 

480,000

 

(90,000)

 

390,000 Total assets 741,000 Liabilities and Equity

 

Accounts payable

 

Short-term notes payable

 

Total current liabilities

 

Long-term note payable

 

Total liabilities

 

Common stock

 

Retained earnings

 

Total stockholders' equity

 

Total liabilities and equity 156,000

 

12,000

 

168,000

 

200,000

 

368,000

 

235,000

 

138,000

 

373,000

 

741,000 Additional Information:

 

1)

 

Sales for March total 10,000 units. Each month's sales are expected to exceed the prior month's

 

results by 5%. The product's selling price is $25 per unit.

 

2) Company policy calls for a given month's ending inventory to equal 80% of the next month's

 

expected unit sales. The March 31 inventory is 8,400 units, which complies with the policy.

 

The purchase price is $15 per unit. 3) Sales representatives' commissions are 12.5% of sales and are paid in the month of the sales. The

 

sales manager's monthly salary will be $3,500 in April and $4,000 per month thereafter. 4) Monthly general and administrative expenses include $8,000 administrative salaries, $5,000

 

depreciation, and 0.9% monthly interest on the long-term note payable. 5) The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables

 

are collected in full in the month following the sale (none is collected in the month of the sale). 6) All merchandise purchases are on credit, and no payables arise from any other transactions. One

 

month's purchases are fully paid in the next month. 7) The minimum ending cash balance for all months is $50,000. If necessary, the company borrows

 

enough cash using a short-term note to reach the minimum. Short-term notes require an interest

 

payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds

 

the minimum, the excess will be applied to repaying the short-term notes payable balance. 8) Dividends of $100,000 are to be declared and paid in May. 9) No cash payments for income taxes are to be made during the second calendar quarter. Income

 

taxes will be assessed at 35% in the quarter 10) Equipment purchases of $55,000 are scheduled for June. REQUIRED

 

1)

 

Prepare sales budget, including budgeted sales for July

 

2)

 

Prepare purchases budget, the budgeted cost of goods sold for each month and quarter, and the

 

cost of the June 30 budgeted inventory

 

3)

 

Prepare the operating expense budget

 

4)

 

Prepare the budgeted Income Statement

 

5)

 

Prepare expected cash receipts from customers and the expected June 30 balance of accounts

 

receivable

 

6)

 

Prepare expected cash payments for purchases and the expected June 30 balance of accounts

 

payable

 

7)

 

Prepare budgeted cash payments for operating expenses

 

8)

 

Prepare the cash budget

 

9)

 

Prepare the budgeted Balance Sheet

 

10)

 

Prepare the budgeted Statement of Cash Flows Problem 22-5B

 

Sales Budget

 

January February March Total January February March Total January February March Total January February March Total January February March Total Budgeted Units

 

Budgeted Unit Sales Price

 

Budgeted Sales in Dollars

 

Total Merchandise Purchases Budget

 

Next Period's unit sales

 

Ratio of inventory to future sales

 

Budgeted ending inventory

 

Add Budgeted sales

 

Required available merchandise

 

Less Beginning Inventory

 

Units to be purchased

 

Budgeted Cost Per Unit

 

Budgeted merchandise purchases Selling Expense Budget

 

Budgeted Sales

 

Sales commission percent

 

Sales Commissions Expense

 

Sales Salaries

 

Total Selling Expenses General and Administrative Expense Budget

 

Salaries

 

Maintenance

 

Depreciation

 

Total Expenses

 

Depreciation Expense Calculations Capital Expenditures Budget

 

January February March Total January February March Total January February March Total Equipment Purchases

 

Land Purchase

 

Total

 

Budgeted Cash Collections from Customers

 

Total Sales

 

Cash Sales

 

Credit Sales

 

Cash Collections

 

Receivables

 

Month after sale

 

Second Month

 

Total from Credit customers

 

Cash Sales

 

Total Cash Received Budgeted Cash Payments for Purchases

 

Credit Purchases

 

Accounts Payable

 

Month after purchase (20%)

 

Second month (80%)

 

Total paid for purchases Cash Budget

 

January

 

Beginning Cash Balance

 

Cash Receipts from Customers

 

Total Cash Available

 

Cash Disbursements:

 

Payments for Purchases

 

Sales Commissions

 

Sales Salaries

 

General & Administrative Salaries

 

Maintenance Expense

 

Interest

 

Taxes Payable

 

Purchase of Equipment

 

Purchase of land

 

Total Cash Disbursements

 

Preliminary Balance

 

Repayment of loan to bank

 

Ending Cash Balance

 

Loan balance, end of month February March Isle Corporation

 

Budgeted Income Statement

 

For the Quarter ended March 31, 2014 Budgeted Balance Sheet

 

Isle Corporation

 

Budgeted Balance Sheet

 

31-Mar-14

 

Assets

 

Cash

 

Accounts receivable

 

Inventory

 

Total Current Assets

 

Land

 

Equipment

 

Less accumulated depreciation

 

Total Assets

 

Liabilities and Equity

 

Accounts payable

 

Bank loan payable

 

Taxes payable

 

Total liabilities

 

Common stock

 

Retained earnings

 

Total stockholders' equity

 

Total liabilities and equity Cash budget

 

Note 1

 

Note 2

 

Capital budget

 

Note 3

 

Note 4 Note 5

 

Cash Budget

 

Income Statement Note 6 Budgeted Statement of Cash Flows

 

Isle Corporation

 

Budgeted Statement of Cash Flows

 

For the Quarter ended March 31, 2013

 


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