Prepare a cash budget for the first two quartersterrys

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Reference no: EM13356099

Prepare a cash Budget for the first two quarters

Terry's Equipment Center has been organized to sell a line of lawn and garden equipments. The company began operations on January 1 with the following assets.

Cash - $14,000
Inventory - 29,000
Land - 31,000
Buildings and equipments - $250,000
(Useful life 20 years, no residual value, of which $210,000 relates to selling and $40,000 to general and administrative activities)

Sales for January, February, and March (i.e., the first quarter) are expected to $140,000; they are expected to be $280,000 for the next three months, and $325,000 the three months after that. Certain expenses are expected to vary with sales as follows:

	Percent of Sales Dollars
Cost of goods sold	60
Bad debts	2
Variable selling expenses	14
Variable administrative expenses	5

Other expenses not expected to vary with sales:

Selling	$25,000 per quarter
Administrative	18,550 per quarter
Depreciation	3,125 per quarter

Required:
Prepare an operating budget for the first and second quarters of operations of Terry's Equipment Center.

Reference no: EM13356099

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