Nordic company a merchandising company prepares its master, Ask an Expert

Accounting

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 company%u2019s balance sheet showed the following account balances:


Cash	$	15,000
Accounts receivable		59,200
Inventory		16,920
Buildings and equipment (net)		234,000
Accounts payable			$	24,000
Capital stock				170,000
Retained earnings				131,120

	$	325,120	$	325,120

b.	Actual sales for March and budgeted sales for April%u2013July are as follows:


March (actual)	$74,000
April	$94,000
May	$104,000
June	$109,000
July	$64,000

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%u2019s gross margin percentage is 40% of sales.
e.	Monthly selling and administrative expenses are budgeted as follows: salaries and wages, $12,000 per month; shipping, 6% of sales; advertising, $7,400 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%u2019s ending inventory should equal 30% of the following month%u2019s cost of goods sold.
g.	Half of a month%u2019s 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, $12,000; and May, $5,000.
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:
	Schedule of expected cash collections:

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9957305

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