Reference no: EM13579947
Foxglove Company, a growing retailer, is preparing its budget for the first half of the year assuming the following Sales in each month:
|
January |
February |
March |
April |
May |
June |
| Sales |
$200,000 |
$220,000 |
$242,000 |
$266,200 |
$292,800 |
$332,000 |
For budget purposes, the following assumptions are used:
a. The company's Gross Margin is 20%
b. All merchandise is purchased in the month prior to the month of Sale.
c. 75% of merchandise purchases are made on credit with the rest paid in Cash
d. For credit purchases, 30% is paid in the month of purchase, 50% in the month following and the remaining 20% in the second month after purchase
e. Half of Sales are made on Credit with the other 50% in Cash each month
g. Selling and administrative expenses of $15,000 per month include $2,500 of depreciation expense
h. The company incurs interest expense of $1,000 per month which it pays in Cash in March and June
i. Foxglove will be declaring a dividend of $10,000 in February and paying to shareholders in March
k. The budgeted balance in Retained Earnings on January 31 is $250,000
Q.1 Foxglove's budgeted cash disbursements related to merchandise purchases for the month of March would be:
Q.2 Foxglove's budgeted Retained Earnings balance at the end of February would be: