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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

Expert verified

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

Preparing the financial budget鈥攃ash budget Hoppy Company requires a minimum cash balance of $3,500. When the company expects a cash deficiency, it borrows the exact amount required on the first of the month. Expected excess cash is used to repay any amounts owed. Interest owed from the previous month鈥檚 principal balance is paid on the first of the month at 14% per year. The company has already completed the budgeting process for the first quarter for cash receipts and cash payments for all expenses except interest. Hoppy does not have any outstanding debt on January 1. Complete the cash budget for the first quarter for Hoppy Company. Round interest expense to the nearest whole dollar.

Preparing a financial budget鈥攕chedule 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?

Preparing an operating budget鈥攑roduction budget Bailey Company expects to sell 1,500 units of finished product in January and 1,750 units in February. The company has 180 units on hand on January 1 and desires to have an ending inventory equal to 80% of the next month鈥檚 sales. March sales are expected to be 1,820 units. Prepare Bailey鈥檚 production budget for January and February.

Preparing a financial budget鈥攂udgeted income statement and balance sheet

Ballentine Company has the following post-closing trial balance on December 31, 2018:

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

Budgeted total sales, all on account $ 305,500 Budgeted direct materials to be purchased and used 40,000 Budgeted direct labor cost 12,500 Budgeted manufacturing overhead costs: Variable manufacturing overhead 2,600 Depreciation 800 Insurance and property taxes 1,100 Budgeted cost of goods sold 71,300 Budgeted selling and administrative expenses: Salaries expense7,000 Rent expense 3,500 Insurance expense 2,000 Depreciation expense 350 Supplies expense 3,055 Budgeted cash receipts from customers 263,500 Budgeted income tax expense 44,000 Budgeted purchase and payment for capital expenditures

(additional equipment) 34,000

Additional information:

a. Direct materials purchases are paid 50% in the quarter purchased and 50% in the next quarter.

b. Direct labor, ma following budgeted income statement manufacturing overhead, selling and administrative costs, and income tax expense are paid in the quarter incurred.

c. Accounts payable at December 31, 2018 are paid in the first quarter of 2019. Requirements

1. Prepare Ballentine Company鈥檚 budgeted income statement for the first quarter of 2019.

2. Prepare Ballentine Company鈥檚 budgeted balance sheet as of March 31, 2019.

What is budgetary slack? Why might managers try to build slack into their budgets?
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