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Chapter 22: Q12SE (page 1230)

Understanding the components of the master budgetThe following are some of the components included in the master budget of amerchandising company.

a. Budgeted balance sheet

b. Sales budget

c. Capital expenditures budget

d. Budgeted income statement

e. Cash budget

f. Inventory, purchases, and cost of goods sold budget

g. Selling and administrative expense budget

List the items of the master budget in order of preparation.

Short Answer

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Answer

The master budget of a merchandising company starts with sales budget and ends with budgeted balance sheet.

Step by step solution

01

Meaning of master budget

The set of budgeted financial statements and supporting schedules for theentire Company; includes the operating, capital, and financial budgets.

02

items of the master budget in order of preparation

b. sales budget

f. Inventory, purchase, and cost of goods sold budget

g. Selling and administrative expense budget

c. Capital expenditure budget

e. Cash budget

d. Budgeted income statement

a. Budgeted balance sheet


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Most popular questions from this chapter

What is sensitivity analysis? Why is it important for managers?

Preparing a financial budget—schedule of cash receipts, sensitivity analysis

Marcel Company projects the following sales for the first three months of the year: \(11,200 in January; \)12,300 in February; and $11,100 in March. The company expects 60% of the sales to be cash and the remainder on account. Sales on account are collected 50% in the month of the sale and 50% in the following month. The Accounts Receivable account has a zero balance on January 1. Round to the nearest dollar.

Requirements

1. Prepare a schedule of cash receipts for Marcel for January, February, and March. What is the balance in Accounts Receivable on March 31?

2. Prepare a revised schedule of cash receipts if receipts from sales on account are 60% in the month of the sale, 30% in the month following the sale, and 10% in the second month following the sale. What is the balance in Accounts Receivable on March 31?

Match the following statements to the appropriate budgeting objective or benefit: developing strategies, planning, directing, controlling, coordinating and communicating, and benchmarking.

1. Managers are required to think about future business activities.

2. Managers use feedback to identify corrective action.

3. Managers use results to evaluate employees’ performance.

4. Managers work with managers in other divisions.

Crowley Company projects the following sales:

January February March

Cash sales (25%) \( 5,000 \) 5,500 \( 6,000

Sales on account (75%) 15,000 16,500 18,000

Total sales \) 20,000 \( 22,000 \) 24,000

Crowley collects sales on account in the month after the sale. The Accounts Receivable balance on January 1 is \(13,500, which represents December’s sales on account. Crowley projects the following cash receipts from customers:

January February March

Cash receipts from cash sales \) 5,000 \( 5,500 \) 6,000

Cash receipts from sales on account 13,500 15,000 16,500

Total cash receipts from customers \( 18,500 \) 20,500 $ 22,500

Recalculate cash receipts from customers if total sales remain the same but cash sales are only 20% of the total.

Preparing a financial budget—budgeted income statement and balance sheet Ball Company has the following post-closing trial balance on December 31, 2018:

The company’s accounting department has gathered the following budgeting information for the first quarter of 2019:

Budgeted total sales, all on account $ 121,800 Budgeted purchases of merchandise inventory, all on account 60,400 Budgeted cost of goods sold 60,900 Budgeted selling and administrative expenses:

Commissions expense 6,090 Salaries expense 7,000 Rent expense 4,100 Depreciation expense 600 Insurance expense 400 Budgeted cash receipts from customers 125,840 Budgeted cash payments for merchandise inventory 67,775 Budgeted cash payments for salaries and commissions 14,822 Budgeted income tax expense 5,400 Additional information: Rent and income tax expenses are paid as incurred. Insurance expense is an expiration of the prepaid amount.

Requirements

  1. Prepare a budgeted income statement for the quarter ended March 31, 2019.
  2. 2. Prepare a budgeted balance sheet as of March 31, 2019.
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