Question
DEWEY, CHEETUM AND HOWE - FINE DINING
MASTER BUDGET PREPARATION
Because of your financial knowledge you have asked to prepare budgeted financial statements and supporting schedules for the restaurant's first year of operations. It has been suggested that you prepare this information for each quarter and for the year. You have been provided with the following researched information to help you with your preparation and you have also been provided with opening account balances as per section J.
A. Budgeted sales for each quarter and the year are as follows:
For the year $850,000
1st quarter 27% 80% is generated from food sales
2nd quarter 23% 20% is generated from beverage sales
3rd quarter 20%
4th quarter 30%
B. Your fixed salaries for the year are..................$187,500
Your variable salaries expressed as a percentage of sales are...............6.4%
Your employee benefits program costs expressed as a % of total gross salaries..........11.5%
All salaries are paid in the quarter in which they are incurred. Employee benefits are accrued and paid in the quarter after the accrual.
C. Your quarterly fixed rent expense which is paid on the first of each quarter is $3,975
Your quarterly variable rent expense expressed as a percentage of sales is 4.9%
Variable rent expense is accrued and is paid in the quarter after the benefit is received.
D. Your total sales are comprised of:..........Credit card sales 72%
...............................................Cash sales 19%
......................................Sales on account 9%
Your credit card commissions expense which is deducted by the financial institution is.. 3.1%
Previous collection experience provides you with information on collection patterns as follows:
Credit cards sales-in the quarter of sale.............................81%
Credit card sales-in the quarter following sale......................19%
Sales on account are collected in the quarter following the sale.
E. The following other annual expenses have been given and are incurred evenly throughout the year and are paid
quarterly as incurred:
Advertising and promotion 14,000 Miscellaneous 1,200
Bank charges 1,800 Office 1,200
Business tax and licenses 7,000 Professional fees 6,000
Delivery 1,200 Printing 4,000
Repairs and maintenance 4,000
Laundry and uniforms 8,000 Supplies 2,000
Telephone 2,250 Travel 2,000
F. Utilities are paid quarterly and are incurred monthly as follows: Fixed $375
Variable 0.7% of Sales
G. Your initial bank loan (see opening Balance Sheet) was obtained at an interest rate of...12.1%
and is paid each quarter along with the principal payment of.....................................$15,000
You are required to maintain a minimum quarterly cash balance of.............................$10,000
You have negotiated an operating line of credit of....................................................$50,000
Your annual rate of interest on the operating line of credit is......................................19.0%
You may borrow and repay loan amounts in increments of........................................$1,000
H. Depreciation on assets is as follows: Rate/Time
Leasehold improvements Declining balance method 25%
Kitchen and bar equipment Declining balance method........................ 25%
Furniture and Equipment Declining balance method........................ 25%
China and glass package Straight line method - no salvage value....... 4 Years
I. Cost of sales for food expressed as a percentage of food sales is...............................38%
Cost of sales for beverages expressed as a percentage of beverage sales is.................25%
The restaurant would like to maintain ending inventories based on an amount equal to a specific percentage of next quarters cost of sales:.............................for food 18.8%
..............................................................................for beverages 39.5%
Combined projected food and beverage sales for the first quarter of year 2 are.........$300,000
All purchases of food and beverages are paid for as follows: In the quarter of purchase....70%
.....................................................In the quarter following purchase... 30%
J. The opening account balances as of the beginning of the current fiscal year, January 1, 2009:
Inventory-food $11,000 Interest payable $1,500
Inventory-liquor 8,500 R.Dewey, capital 65,891
Prepaid insurance 3,600 O.Cheetum, capital 65,891
Service deposits 2,875 B.Howe, capital 65,891
Leasehold improvements 368,000 M.E.Fine, capital 65,891
Kitchen and bar equipment 130,000 Accounts payable 19,500
Furniture and fixtures 125,000
China and glass package 10,000 Benefits payable 725
Operating line payable 10,000 Bank loan payable-long term 314,886
Bank loan payable-current 60,000
K. It was decided that the restaurant would be called Dewey, Cheetum, and Howe - Fine Dining
L. Label your worksheets as follows: Sheet 1-SALES AND COLLECTIONS
Sheet 2-PURCHASES AND DISBURSEMENTS
Sheet 3-CASH BUDGET
Sheet 4-INCOME STATEMENT
Sheet 5-BALANCE SHEET
REQUIRED:
(A). Prepare a sales budget for food and beverages for each quarter and the year.
(B). Prepare a detailed schedule of cash collections for each quarter and for the year.
(C). Prepare a separate purchase budget for food and beverage for each quarter and the year.
(D). Prepare a schedule of cash disbursements of inventory purchases for each quarter and the year.
(E). Prepare a cash budget for each quarter and for the year.
(F). Prepare a budgeted income statement for each quarter and for the year.
(G). Prepare a budgeted balance sheet for the end of the fiscal year.
Additional information-
The question relates to Basic Accounting and it discuss about preparing sales, purchases and distribution, cash budget, income statement and balance sheet for an organization.