Make merchandise purchase budget for three month

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Reference no: EM132656277

1. Picanuy Corporation has collected the following information to prepare master budget.

Balance sheet on January 1. 2015

 

Liability and Capital

 

Assets

 

Equity

150.000

Equipment

20.000

10% Debenture

20.000

Merchandise Inventory

100000

Tax Payable

20000

Accounts Receivable

 

Retained Earnings

26.000

November 516.000

 

 

 

December $60,000

76,000

 

 

Cash

20,000

Total

216,000

Total

216,000

Sales would be 20% in cash and 80% on credit. Credit would be realizing 50% in the month of sales. 30% in the next month; 16% in next two months after date of sales and bad debts would be 4%. All expenses including purchase would be paid in the same month of expenses and purchase. Gross profit margin would be 50% on sales and administrative and distribution expenses would be 10% of gross sales.

Sufficient merchandise inventory would be maintained to meet next month's sales needs. The company desires to have a minimum cash balance of $20,000. The 10% debenture would retire on January 1st and payable at premium of 10%. Government policy required to pay tax on income semiannually, e.g., in the month ending of March $15,000 and on the same date acquire a new equipment of $50,000. Applied rate of depreciation is 20% reducing balance method.

A line of credit in a multiple of $10,000 at an interest rate of 12% would be available to meet cash shortage and repayment would be in $1,000 with the interest on principal repaid.

Required:

Question 1: Merchandise purchase budget for three month ending march

Question 2: Cash budget for three month ending march

Question 3: Income statement for three month ending march

Question 4: Balance sheet as of March

Reference no: EM132656277

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