Running Head: Master Budget
2017, accounts payable balance, $85,000 is paid in January and the remaining $265,000 is paid
in February.
d. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding
commissions) are $96,000 per year.
e. General and administrative salaries are $156,000 per year. Maintenance expense equals
$2,100 per month and is paid in cash.
f. Equipment reported in the December 31, 2017, balance sheet was purchased in January
2017. It is being depreciated over eight years under the straight-line method with no salvage
value. The following amounts for new equipment purchases are planned in the coming quarter:
January, $35,000; February, $97,000; and March, $29,000. This equipment will be depreciated
under the straight-line method over eight years with no salvage value. A full month’s
depreciation is taken for the month in which equipment is purchased.
g. The company plans to acquire land at the end of March at a cost of $180,000, which will be
paid with cash on the last day of the month.
h.Ballixter Boxing has a working arrangement with its bank to obtain additional loans as
needed. The interest rate is 12% per year, and interest is paid at each month-end based on the
beginning balance. Partial or full payments on these loans can be made on the last day of the
month. The company has agreed to maintain a minimum ending cash balance of $23,365 in
each month.
i. The income tax rate for the company is 32%. Income taxes on the first quarter’s income will
not be paid until April 15.
Requirements:
Prepare a master budget for each of the first three months of 2018; include the following
component budgets (show supporting calculations as needed directly behind that budget, and
round amounts to the nearest dollar):
1.) Monthly sales budgets (showing both budgeted unit sales and dollar sales).
2.) Monthly merchandise purchases budgets.
3.) Monthly selling expense budgets
.
4.) Monthly general and administrative expense budgets.
