Question

Walton Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2019. The company president formed a planning committee to prepare a master budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks:

Problem 14-23 Part 1

Required

1. October sales are estimated to be $390,000, of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 20 percent per month. Prepare a sales budget.

2. The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. Prepare a schedule of cash receipts.

3. The cost of goods sold is 70 percent of sales. The company desires to maintain a minimum ending inventory equal to 20 percent of the next month’s cost of goods sold. However, ending inventory of December is expected to be $13,700. Assume that all purchases are made on account. Prepare an inventory purchases budget.

4. The company pays 60 percent of accounts payable in the month of purchase and the remaining 40 percent in the following month. Prepare a cash payments budget for inventory purchases.

5. Budgeted selling and administrative expenses per month follow:

Salary expense (fixed)	$	19,700
Sales commissions		4	% of Sales
Supplies expense		2	% of Sales
Utilities (fixed)	$	3,100
Depreciation on store fixtures (fixed)*	$	5,700
Rent (fixed)	$	6,500
Miscellaneous (fixed)	$	2,900

1. *The capital expenditures budget indicates that Walton will spend $173,800 on October 1 for store fixtures, which are expected to have a $37,000 salvage value and a two-year (24-month) useful life.

Use this information to prepare a selling and administrative expenses budget.

6. Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for selling and administrative expenses.

7. Walton borrows funds, in increments of $1,000, and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. It pays interest of 2 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $29,000 cash cushion. Prepare a cash budget.

Walton Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2019. The company president formed a planning committee to prepare a master budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks:

8. Prepare a pro forma income statement for the quarter.

9. Prepare a pro forma balance sheet at the end of the quarter.

10. Prepare a pro forma statement of cash flows for the quarter.

Answer 1

Dear student, we cannot able to post solution more than four subparts of the question as per our policy.

Answer 1
Sales Budget
	October	November	December	Total
Sales revenue (20% increase every month)	$        390,000	$            468,000	$        561,600	$        1,419,600
Cash Sales (Sales revenue * 40%)	$        156,000	$            187,200	$        224,640	$            567,840
Credit Sales (Sales revenue * 60%)	$        234,000	$            280,800	$        336,960	$            851,760
Sales revenue	$        390,000	$            468,000	$        561,600	$        1,419,600

Answer 2
Schedule of cash receipts
	October	November	December	Total
From Sales of October	$        156,000	$            234,000		$            390,000
From Sales of November		$            187,200	$        280,800	$            468,000
From Sales of December			$        224,640	$            224,640
Cash Receipts from Sales	$        156,000	$            421,200	$        505,440	$        1,082,640

Answer 3
Purchase Budget
	October	November	December	Total
Cost of Goods sold (Sales revenue * 70%)	$        273,000	$            327,600	$        393,120	$            993,720
Add: Ending Finished goods inventory (Next month's Cost of Goods sold * 20%)	$          65,520	$              78,624	$          13,700	$              13,700
Units available for sale	$        338,520	$            406,224	$        406,820	$        1,007,420
Less: Beginning Finished goods inventory	$                     0	$              65,520	$          78,624	$                         0
Purchase of Inventory	$        338,520	$            340,704	$        328,196	$        1,007,420

Answer 4
Calculation parts
	October	November	December	Total
Purchase of Inventory	$        338,520	$            340,704	$        328,196	$        1,007,420
Amount Paid in same month (Purchase of Inventory * 60%)	$        203,112	$            204,422	$        196,918	$            604,452
Amount Paid after one month (Purchase of Inventory * 40%)	$        135,408	$            136,282	$        131,278	$            402,968
Answer 4
Cash Payment budget for inventory purchase
	October	November	December	Total
From Purchase of October	$        203,112	$            135,408		$            338,520
From Purchase of November		$            204,422	$        136,282	$            340,704
From Purchase of December			$        196,918	$            196,918
Cash Payment budget for inventory purchase	$        203,112	$            339,830	$        333,199	$            876,142