A relatively new company, Wine To End Whining, Inc., has determined they need to engage in a budgeting process as part of their new strategic plan. The Company has asked you to provide the following items for the months of January, February, and March of 2017: A) a Purchases Budget; B) a Cash Budget; C) a Budgeted Income Statement; and D) a Budgeted Balance Sheet. They have provided you with the planning document below and also, with their December 31, 2016 Balance Sheet. Please complete the four items requested on Worksheet Tabs A, B, C, and D of this Workbook. Check Figures are provided for you on each Worksheet.
Expected Sales in Dollars
January 2017 $2,20,000
February 2017 $1,93,000
March 2017 $1,78,000
April 2017 $2,01,000
All Sales are on Credit
Collections of Accounts Receivable
Month of Service 44%
Month following Service 56%
Actual December 2016 Sales $2,00,000
Cost of Goods Sold is 65% of selling price. 65%
Planned ending inventory as a percentage of next month's requirement. 60%
Purchases are are all on credit.
Purchases paid in current month 30%
Purchases paid in next month 70%
Actual Purchases made in December 2016 $1,37,800
Sales commission as a percent of sales 3%
Sales commission are paid the month after they are incurred.
Advertising expenses have a fixed and variable portion:
Fixed portion $6,400
The fixed portion of the advertising is paid one month in advance.
Variable portion as a percentage of sales 2%
The variable portion is paid in the month incurred
Months of insurance coverage paid for 12
The policy period is from February 1 to January 31 each year
The premium to be paid on February 1, 2017 is 24,000 $24,000
The premium will be charged to prepaid insurance
Selling and Administrative expenses have a fixed and variable portion:
Fixed portion $29,000
Variable portion as a percentage of sales 3%
S&A expenses are paid in the month incurred
Depreciation expense per month $4,000
The interest rate on the long term debt is 4% APR 4%
Interest is incurred on the principal balance outstanding each month.
Interest is paid on a quarterly basis. Interest for December to February will be paid March 1.
No principal payments are scheduled to be made on the long-term debt until September of 2017
Income Tax rate 30%
Accrued taxes are paid on the 15th of January, April, July and October
The Company's Board of Directors plans to declare a dividend on February 20 $17,000
It will be paid on March 15.