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PROBLEM 8–27 Completing a Master Budget [LO2, LO4, LO7, LO8, LO9, LO10] Nordic Company, a… 1 answer below » PROBLEM 8–27 Completing a Master Budget [LO2, LO4, LO7, LO8, LO9, LO10] Nordic Company, a merchandising company, prepares its master budget on a quarterly basis. The fol- lowing data have been assembled to assist in preparation of the master budget for the second quarter. a. As of March 31 (the end of the prior quarter), the company’s balance sheet showed the follow- ing account balances: View complete question » PROBLEM 8–27 Completing a Master Budget [LO2, LO4, LO7, LO8, LO9, LO10] Nordic Company, a merchandising company, prepares its master budget on a quarterly basis. The fol- lowing data have been assembled to assist in preparation of the master budget for the second quarter. a. As of March 31 (the end of the prior quarter), the company’s balance sheet showed the follow- ing account balances: Cash . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,000 Accounts receivable . . . . . . . . . . . . . 48,000 Inventory. . . . . . . . . . . . . . . . . . . . . . 12,600 Buildings and equipment (net) . . . . . 214,100 Accounts payable . . . . . . . . . . . . . . . $ 18,300 Capital stock . . . . . . . . . . . . . . . . . . . 190,000 Retained earnings . . . . . . . . . . . . . . . 75,400 $283,700 $283,700 b. Actual sales for March and budgeted sales for April–July are as follows: March (actual) . . . . . . . . . . . . . . . $60,000 April . . . . . . . . . . . . . . . . . . . . . . $70,000 May . . . . . . . . . . . . . . . . . . . . . . $85,000 June . . . . . . . . . . . . . . . . . . . . . . $90,000 July . . . . . . . . . . . . . . . . . . . . . . . $50,000 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’s gross margin percentage is 40% of sales. (In other words, cost of goods sold is 60% of sales.) e. Monthly selling and administrative expenses are budgeted as follows: salaries and wages, $7,500 per month; shipping, 6% of sales; advertising, $6,000 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’s ending inventory should equal 30% of the following month’s cost of goods sold. g. Half of a month’s 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, $11,500; and May, $3,000. 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: 1. Schedule of expected cash collections: 2. a. Merchandise purchases budget: b. Schedule of expected cash disbursements for merchandise purchases: 3. Schedule of expected cash disbursements for selling and administrative expenses: 4. Cash budget: 5. Prepare an absorption costing income statement for the quarter ending June 30 as shown in Schedule 9 in the chapter. 6. Prepare a balance sheet as of June 30. View less » Dec 07 2015 05:55 PM
