UYEN DINH
Professor: STEPHEN BROWN
ACC 2355 _ Managerial Accounting II_ Section 800
MASTER BUDGET ASSIGNMENT
The 1st quarter master budget of Lim Corporation contains the following
schedules, which are displayed and explained in the following pages:
Schedule
1
2
3
4
5
6
Title of Schedule
Sales Budget
Expected Cash Collection
Merchandise Purchasing Budget
Cash Disbursement Budget
Summary Cash Budget
Absorption costing income statement
Balance sheet as of March 31
Sales Budget
The first step in developing Lim Corporation’s 1st quarter master budget is to prepare the sale budget.
Let’s make assumption that the budget year is 20X1.
Following is schedule 1, sale budget of Lim Corporation, based on the data b and c:
LIM CORPORATION
Sales Budget
For the quarter Ending March 31, 20X1
20X0
20X1 (Budgeted Sales)
December January February March
(Actual)
60000
70000
80000
85000
Total Sales
1st Quarter April
(1)
235000
55000
Cash Sales (2)= 40%*Sales
24000
28000
32000
34000
94000
22000
Credit Sales (3)= 60%*Sales
36000
42000
48000
51000
141000
33000
Schedule 1.
Schedule of Expected Cash Collection
Also based on the date b and data c, Lim Corporation’s cash receipts budget - schedule 1 detailed the
expected cash collections during the 1st quarter:
Cash Collection from:
Cash Sales
Credit Sales (5)
1
LIM CORPORATION
Cash Receipt Budget
For the quarter Ending March 31, 20X1
20X1
January February March
28000
32000
34000
36000
( ) Quarter = January + February + March (ALWAYS)
2
( ) Cash Sales = 40%*Sales
January: 28000 = 40%*70000
February: 32000 = 40%*80000
3
( ) Credit Sales = 60%*Sales
January: 42000 = 60%*70000
February: 48000 = 60%*80000
4
( ) Quarter = January + February + March
5
( ) Credit Sales collection = 100% of previous month’s credit sales
January: 42000 = 60%*70000
February: 48000 = 60%*80000
42000
48000
1st Quarter (4)
94000
126000
Total Cash Receipts (Cash Collection) (6)
Schedule 2.
64000
74000
82000
220000
Merchandise Purchasing Budget
This budget is based to the data a & d.
LIM CORPORATION
Merchandise Purchasing Budget
For the quarter Ending March 31, 20X1
January February
49000
56000
20X1
March
59500
1st Quarter (7)
164500
11200
11900
7700
7700 (10)
60200
67900
67200
172200
Less: BEGINNING Inventory (12)
(9800)
(11200)
(11900) (9800) (13)
Required purchases (14)
50400
56700
55300
Budgeted Cost of Goods Sold(8)
=70%*Sales
Add: Desired ENDING inventory (9)
=20%*next month’s COGS
Total Needs (11)
6
162400
( ) Total Cash receipt (Cash collection) =cash sales of current month + credit sales of prior month; OR Total Cash receipt
=40%*sales + 60%*sales of prior month. For instant,
January: 64000 =28000+36000 OR 64000 = 40%*70000 + 60%*60000
February: 74000 = 32000+42000 OR 74000 = 40%*80000 + 60%*70000
7
( ) Quarter = January + February + March
8
( ) Cost of Goods Sold =70%*Sales. For example, 49000 = 21000*70%
9
( ) Desired ENDING inventory =20%*next month’s COGS
January: 11200 = 20%*56000
February: 11900 = 20%*59500
10
( ) Quarter’s Desired Ending Inventory is equal to the desired ending Inventory of March 31.
11
( ) Total Needs = Cost of Goods Sold + Desired Inventory
12
( ) expected beginning inventory of finished goods
13
( ) Quarter’s beginning Inventory = the December ending inventory = the January beginning inventory
14
( ) Required Budget = Total Needs – BEGINING Inventory
Schedule 3.
Expected Cash Disbursement
The cash disbursement budget (schedule 3) details the expected cash payments during the 1st
quarter for Lim Corporation. The pink-shaded top portion shows the schedule of cash payments for the
merchandise purchases which based on data e and the required purchases from schedule 2.
The Selling, general, and Administrative expense budget shows the planned amounts of
expenditures for selling, general, and administrative expenses during the 1st quarter. Lim Corporation’s
selling and administrative expense budget is displayed as the shaded bottom portion – part for selling and
Administrative expense of schedule 3, based on the data f.
LIM CORPORATION
Cash Disbursement Budget
For the quarter Ending March 31, 20X1
For Merchandise Purchases:
Required purchases (From schedule 2)
20X1
December January February March
43400 (16) 50400
56700
55300
1st Quarter (15)
162400
32550 (18)
45150
51975
56350
153475
Commission Expense
12000
12000
12000
36000
Rent
1800
1800
1800
5400
Other expenses (19)
5600
6400
6800
18800
Total Disbursements for Expenses (20)
19400
20200
20600
60200
17
Total Disbursement for Purchases ( )
For Selling and Administrative Expenses:
15
( ) Quarter = January + February + March
16
( ) Required purchases of December = the account payable / 75% = 32550 / 75% = 43400
17
( ) Cash Payments for Purchases = 25% of current month’s required purchases + 75% of prior month’s required purchases. For
example:
January: 45150=25%*50400 + 75%*43400
February: 51975=25%*56700 + 75%*50400
18
( ) Beginning balance of the accounts payable
19
( ) Other expenses = 8%*Sales (including $2400 Depreciation for the quarter)
January: 5600=8%*70000
February: 6400=8%*80000
20
( ) Total Cash payment for expenses (Total expenses ) = Commissions + Rent + Other expenses
For Equipment
3000
8000
Total cash disbursements (21)
67550
80175
Schedule 4.
11000
76950
224675
Summary Cash Budget
 Analysis of short-term financing needs:
In order to maintain cash balance of $5000 at the end of each month while we also need cash to
pay for the equipment in data g, the following analysis table details the amount of cash we need
to borrow from local bank.
Cash balance at beginning of month
Less: minimum cash balance
LIM CORPORATION
January February March
6000
0
0
(5000)
(5000)
(5000)
Cash available for equipment purchases (22)
Less: Cost of investment in Equipment
(from schedule 3)
Required short term borrowing (23)
1st quarter
6000
(5000)
1000
0
0
1000
(3000)
8000
0
(11000)
(2000)
(8000)
0
(10000)
 The cash budget details the expected cash receipts and disbursements during the 1st quarter. Lim
Corporation’s completed cash budget is displayed as schedule 4. The pink shaded top portion pulls
together the cash receipts and cash disbursements detailed in schedule 1 and 3. Also, based on
the data showing the cash balance of $6000 as of December 31, 20X0.
LIM CORPORATION
Cash Budget
For the quarter Ending March 31, 20X1
January February
21
20X1
March
1st Quarter (24)
( ) Total cash disbursement = cash disbursement for inventory + for operating expenses + for equipment
22
( ) Cash available for equipment purchase = beginning cash balance – minimum cash balance required. (1000 = 6000-5000)
(23 ) Based on the data h which local bank allows company to borrow from $1000 up to the total balance of $50000.
24
( ) Quarter = January + February + March
6000
5000
6175
6000
64000
74000
82000
220000
70000
79000
88175
226000
Less: Total cash disbursements (from schedule 3) (67550)
(80175)
(76950) (224675)
Excess (deficiency) of cash (25)
(1175)
11225
Cash balance, January 1, 20X1
Add: Cash receipts (cash collection)
(from schedule 1)
Total cash available
2450
1325
Others (Financing)
Add:
Less:
Proceeds from bank loan (26)
(From analysis of financing needs)
Quarter Interest on bank loan (27)
(at March 31, 20X1)
Repayment of bank loan (28)
March 31, 20X1
10000
CASH BALANCE March 31, 20X1
25
10000
300
10300
1025 (29)
( ) Excess of cash when total cash receipts > total cash disbursements, and vice versa, it is decicency of cash when the cash
receipts < total cash disbursement.
(26) Based on the data h which local bank allows company to borrow from $1000 up to the total balance of $50000. Therefore,
proceeds from bank loan= required short term borrowing.
27
( ) Interest bank loan = 1%per month*borrowing loan=3months*1%*10000=300
28
( ) based on the data h that we repay the loan plus interest at the end of the quarter
29
( ) 1025 = 1325 + 10000 - 10300
Schedule 5.
Absorption Costing Income Statement
LIM CORPORATION
Absorption – Costing Income Statement
For the quarter Ended March 31, 20X1
Sales Revenue (from sale budget)
1st Quarter (30)
235000
Less: Cost of Goods Sold (from schedule 2)
(164500)
Gross Margin (31)
70500
Less: Selling & Administrative expenses
(From schedule 3)
Less: Interest on bank loan
(from schedule 4)
(60200)
10000 (32)
NET INCOME
Schedule 6.
(300)
Balance Sheet as of March 31
LIM CORPORATION
Budgeted Balance Sheet
March 31, 20X1
ASSETS
Cash (from schedule 4)
$ 1025
Account Receivable (33)
$ 51000
Building and Equipment (34)
$119485
Inventory (from schedule 2)
TOTAL:
30
$7700
179210
( ) Quarter = January + February + March
31
( ) Gross margin = Sales revenue – Cost of Goods sold; OR = 30%*Sales (data a)
70500 = 235000 – 164500, OR 70500 = 235000*30%
32
( ) net income before tax = 10000 = 70500-60200-300
33
( ) Account Receivable
Beginning Jan1 36000 + sale on account (sale budget) 141000 – cash collection from credit sales 126000 = 51000
34
( ) balance 110885+cost of equipment acquired 11000-depreciation 2400=119485
LIABILITY + EQUITY
Common shares
100000
Retained earnings (35)
40135
Account payable (36)
41475
Total:
35
181610
( ) Beginning 30135 + net income 10000 =40135
36
( ) beginning 32550 + purchase 162400-cash payments for purchases 153475 (Schedule 3) = 41475
APPENDIX
After using all the data information, I created this condensed table to describe in detail where the
numbers come from, as well as which data I used.
Based
on data
b
Sales
20X0
December
(Actual)
60000
a
Gross margin (38) =30%*Sales
18000
21000
24000
25500
70500
16500
a
Cost of Goods Sold(39) =70%*Sales
42000
49000
56000
59500
164500
38500
c
Cash Sales (40)= 40%*Sales
24000
28000
32000
34000
94000
22000
c
Credit Sales (41)= 60%*Sales
36000
42000
48000
51000
141000
33000
64000
74000
82000
220000
73000
9800
11200
11900
7700
7700 (44)
51800
60200
67900
67200
172200
9800
11200
11900
9800 (47)
Total Cash Receipts (42)
d
Desired ENDING inventory (43)
20X1 (Budget)
January February March
70000
80000
85000
1st Quarter April
(37)
235000
55000
=20%*next month’s COGS
Total Needs (45)
BEGINNING Inventory (46)
37
7700
( ) Quarter = January + February + March
38
( ) Gross margin =30%*Sales
January: 21000 = 30%*70000
February: 24000 = 30%*80000
39
( ) Cost of Goods Sold =70%*Sales. For example, 49000 = 21000*70%
40
( ) Cash Sales = 40%*Sales
January: 28000 = 40%*70000
February: 32000 = 40%*80000
41
( ) Credit Sales = 60%*Sales
January: 42000 = 60%*70000
February: 48000 = 60%*80000
42
( ) Total Cash receipt (Cash collection) =cash sales of current month + credit sales of prior month; OR Total Cash receipt
=40%*sales + 60%*sales of prior month. For instant,
January: 64000 =28000+36000 OR 64000 = 40%*70000 + 60%*60000
February: 74000 = 32000+42000 OR 74000 = 40%*80000 + 60%*70000
43
( ) Desired ENDING inventory =20%*next month’s COGS
January: 11200 = 20%*56000
February: 11900 = 20%*59500
44
( ) Quarter’s Desired Ending Inventory is equal to the desired ending Inventory of March 31.
45
( ) Total Needs = Cost of Goods Sold + Desired Inventory
Required purchases (48)
43400 (49)
50400
56700
55300
162400
e
Total Disbursement for Purchases (50)
32550 (51)
45150
51975
56350
153475
f
Commission Expense
12000
12000
12000
36000
f
Rent
1800
1800
1800
5400
f
Other expenses (52)
5600
6400
6800
18800
Total Disbursements for Expenses (53)
19400
20200
20600
60200
Equipment expenses
3000
8000
f, g
46
11000
( ) expected beginning inventory of finished goods
47
( ) Quarter’s beginning Inventory = the December ending inventory = the January beginning inventory
48
( ) Required Budget = Total Needs – BEGINING Inventory
49
( ) Required purchases of December = the account payable / 75% = 32550 / 75% = 43400
50
( ) Cash Payments for Purchases = 25% of current month’s required purchases + 75% of prior month’s required purchases. For
example:
January: 45150=25%*50400 + 75%*43400
February: 51975=25%*56700 + 75%*50400
51
( ) Beginning balance of the accounts payable
52
( ) Other expenses = 8%*Sales (including Depreciation of $2400)
January: 5600=8%*70000
February: 6400=8%*80000
53
( ) Total Cash payment for expenses (Total expenses ) = Commissions + Rent + Other expenses