Reference no: EM131624780

Assessment: Management Accounting

Budgets

The Balance Sheet of Best Photo Industries Limited, a distributor of photographicsupplies, as of March 31 2015 is given below:

Best Photo Industries Limited Balance Sheet 31st March 2015
Assets	$
Bank	10,000
Accounts Receivable	72,000
Inventory	38,000
Buildings, Equipments and other fixedassets	500,000
Total Assets	620,000
Liabilities and Stockholders Equity
Accounts Payable	90,000
Notes Payable	15,000
Capital Stock	430,000
Retained Earnings	85,000
Total Liabilities and Stockholders Equity	620,000

Best Photo Limited., has not budgeted previously, and for this reason it is limiting its masterbudget planning horizon to just one month ahead, namely, April.

The company has assembled the following budgeted data relating to April:

• Budgeted Sales is $250,000.
• This includes $60,000 cash sales; the remainder will be credit sales.
• 50% of a month's credit sales are collected in the month the sales,
• 50% is collected in the following month.
• All of the March 31 accounts receivable will be collected in April.
• Purchases of inventory are expected to total $200,000 during April.
• These purchases will all be on account.
• 40% of all inventory purchases are paid for in the month of purchase;
• The remainder are paid in the following month.
• All of the March 31 accounts payable (suppliers) will be paid during April.
• The April 30 inventory balance is budgeted at $40,000.
• Selling and administrative expenses for April are budgeted at $52,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,000 for the month.
• The note payable on the March 31 balance sheet will be paid during April. The company's interest expense for April (on all borrowing) will be $700, which will be deducted from the bank account
• New warehouse equipment costing $9,000 will be purchased for cash during April.
• During April, the company will borrow $18,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.

Required:

1. Since the company has no budgeting experience, the CEO would like you to provide him with the content to make abrief presentation about the advantages of budgeting (giving at least 2 advantages)

2. Prepare a cash budget for April. Support your budget with a schedule of expected cashcollections from sales and a schedule of expected cash disbursements for inventorypurchases.

3. Prepare a budgeted income statement for April.

4. Prepare a budgeted balance sheet as of April 30.