Martin & Sons is a small wholesale distributor of consumer goods. The company generates a gross margin of 27% of sales. Sales are 35% for cash and 65% on credit. Credit sales are collected in the month following sale, and accounts receivable on June 30, 2014 are the result of June credit sales. Actual and budgeted sales for the period were as follows:
The company plans for each month’s ending inventory to be 28% of the following month’s budgeted cost of goods sold. Half of a month’s inventory purchases are paid for in the month of purchase; the other half are paid for in the month following purchase. The accounts payable on June 30 are the result of June purchases of inventory. All monthly expenses were paid monthly. Monthly expenses included: commissions, $9,000; rent, $1,200; other expenses (excluding depreciation), 5% of sales. Depreciation is $1,300 for the quarter and includes depreciation on new assets acquired during the quarter. The assets acquired for cash during the quarter included equipment of $2,100 in July and $3,000 in August. The company wishes to maintain a minimum cash balance of $3,000 at the end of each month. The company has a financing facility that allows the company to borrow in increments of $1,000 at the beginning of each month from a local bank, up to a total loan balance of $30,000. The interest rate on these loans is 1.5% per month, and interest is not compounded. The company, when able, repays the loan plus accumulated interest at the end of the quarter.
Current assets as of June 30:
Buildings and equipment, net $102,550
Using the data above, for quarter ending September 2014, prepare the following:
a. The schedule of the expected cash collections
b. The merchandise purchases budget:
c. The schedule of expected cash disbursements – merchandise purchases.
d. schedule of expected cash disbursement –Selling and administrative expenses
e. The cash budget:
f. An absorption costing income statement,
g. A balance sheet as of September 30.