Dils Brother Department Store prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for 2017.
| Dils Brother Department Store Balance Sheet March 31, 2017 | |||
|---|---|---|---|
| Assets | Liabilities and Stockholders’ Equity | ||
| Cash | $ 4,000 | Accounts payable | $31,000 |
| Accounts receivable | 31,000 | Dividends payable | 15,000 |
| Inventory | 36,000 | Rent payable | 3,000 |
| Prepaid Insurance | 3,000 | Stockholders’ equity | 50,000 |
| Fixtures | 25,000 | ||
| Total assets | $99,000 | Total liabilities and equity | $99,000 |
Actual and forecasted sales for selected months in 2017 are as follows:
| Month | Sales Revenue |
|---|---|
| January | $ 70,000 |
| February | 60,000 |
| March | 50,000 |
| April | 60,000 |
| May | 70,000 |
| June | 80,000 |
| July | 100,000 |
| August | 90,000 |
Monthly operating expenses are as follows:
| Wages and salaries | $ 27,000 |
| Depreciation | 100 |
| Utilities | 1,500 |
| Rent | 3,000 |
Cash dividends of $15,000 are declared during the third month of each quarter and are paid during the first month of the following quarter. Operating expenses, except insurance, rent, and depreciation are paid as incurred. Rent is paid during the following month. The prepaid insurance is for five more months. Cost of goods sold is equal to 50 percent of sales. Ending inventories are sufficient for 120 percent of the next month’s cost of sales. Purchases during any given month are paid in full during the following month. All sales are on account, with 50 percent collected during the month of sale, 40 percent during the next month, and 10 percent during the month thereafter. Money can be borrowed and repaid in multiples of $1,000 at an interest rate of 12 percent per year. The company desires a minimum cash balance of $4,000 on the first of each month. At the time the principal is repaid, interest is paid on the portion of principal that is repaid. All borrowing is at the beginning of the month, and all repayment is at the end of the month. Money is never repaid at the end of the month it is borrowed.
(a) Prepare a purchases budget for each month of the second quarter ending June 30, 2017.
| Dils Brothers Department Store Monthly Purchase Budget Quarter Ending June 30, 2017 | ||||
|---|---|---|---|---|
| April | May | June | Total | |
| Budgeted purchases | $Answer | $Answer | $Answer | $Answer |
(b) Prepare a cash receipts schedule for each month of the second quarter ending June 30, 2017. Do not include borrowings.
| Dils Brothers Department Store Schedule of Monthly Cash Receipts Quarter Ending June 30, 2017 | ||||
|---|---|---|---|---|
| April | May | June | Total | |
| Total cash receipts | $Answer | $Answer | $Answer | $Answer |
(c) Prepare a cash disbursements schedule for each month of the second quarter ending June 30, 2017. Do not include repayments of borrowings.
| Dils Brothers Department Store Schedule of Monthly Cash Disbursements Quarter Ending June 30, 2017 | ||||
|---|---|---|---|---|
| April | May | June | Total | |
| Total cash disbursements | $Answer | $Answer | $Answer | $Answer |
(d) Prepare a cash budget for each month of the second quarter ending June 30, 2017. Include budgeted borrowings and repayments.
Only use negative signs, if needed, for: excess receipts over disbursements, balance before borrowings and cash balances (beginning and ending).
| Dils Brothers Department Store Monthly Cash Budget Quarter Ending June 30, 2017 | ||||
|---|---|---|---|---|
| April | May | June | Total | |
| Cash balance, beginning | $Answer | $Answer | $Answer | $Answer |
| Receipts | Answer | Answer | Answer | Answer |
| Disbursements | Answer | Answer | Answer | Answer |
| Excess receipts over disb. | Answer | Answer | Answer | Answer |
| Balance before borrowings | Answer | Answer | Answer | Answer |
| Borrowings | Answer | Answer | Answer | Answer |
| Loan repayments | Answer | Answer | Answer | Answer |
| Cash balance, ending | $Answer | $Answer | $Answer | $Answer |
(e) Prepare an income statement for each month of the second quarter ending June 30, 2017.
Only use negative signs to show net losses for income.
| Dils Brothers Department Store Budgeted Monthly Income Statements Quarter Ending June 30, 2017 | ||||
|---|---|---|---|---|
| April | May | June | Total | |
| Sales | $Answer | $Answer | $Answer | $Answer |
| Cost of sales | Answer | Answer | Answer | Answer |
| Gross profit | Answer | Answer | Answer | Answer |
| Operating expenses: | ||||
| Wages and salaries | Answer | Answer | Answer | Answer |
| Depreciation | Answer | Answer | Answer | Answer |
| Utilities | Answer | Answer | Answer | Answer |
| Rent | Answer | Answer | Answer | Answer |
| Insurance | Answer | Answer | Answer | Answer |
| Interest | Answer | Answer | Answer | Answer |
| Total expenses | Answer | Answer | Answer | Answer |
| Net income | $Answer | $Answer | $Answer | $Answer |
(f) Prepare a budgeted balance sheet as of June 30, 2017.
| Dils Brothers Department Store Budgeted Balance Sheet June 30, 2017 | |||
|---|---|---|---|
| Assets | Liabilities and Equity | ||
| Cash | $Answer | Merchandise payable | $Answer |
| Accounts receivable | Answer | Dividend payable | Answer |
| Inventory | Answer | Rent payable | Answer |
| Prepaid insurance | Answer | Loans payable | Answer |
| Fixtures | Answer | Interest payable | Answer |
| Total assets | $Answer | Stockholders’ equity | Answer |
| Total liab. & equity | $Answer | ||
