Problem
R A Chad Associates, a manufacturing company, prepares its master budget on a quarterly basis. The following data have been assembled to assist in the preparation of the master budget for the final quarter.
• As of September 30, 2005, the company's balance sheet showed the following account balances:
|
Cash
|
$18,000
|
|
|
Accounts receivables
|
96,000
|
|
|
Inventory
|
25,200
|
|
|
Building & equipment (net)
|
428,200
|
|
|
Accounts payable
|
|
36,600
|
|
Capital
|
|
380,000
|
|
Retained earnings
|
|
150,800
|
|
|
567,400
|
567,400
|
• Actual sales for September and budgeted sales for the final quarter are as follows:
|
September (actual)
|
120,000
|
|
October
|
140,000
|
|
November
|
170,000
|
|
December
|
180,000
|
|
January
|
100,000
|
• 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 September 30 are as a result of September credit sales.
• The company's gross profit rate is 40% of sales. The cost of goods sold is 60% of sales.
• Monthly expenses are budgeted as follows: salaries and wages $15,000 per month, shipping 6% of sales, advertising $12,000 per month, other expenses 4% of sales, depreciation of equipment will be $12,000 for the quarter.
• At the end of each month, inventory is to be on hand equal 30% of the following month's cost of goods sold.
• Half of the month's inventory purchases are paid for in the month of purchase and half in the following month.
• Equipment purchases during the quarter will be as follows: October $23,000 and November $6,000.
Dividends totaling $6,000 will be paid in December.
Task
Prepare the cash budget along with the supporting schedules necessary for the quarter ending December 31, 2005