Developing a Master Budget for a Merchandising Organization Dils Brother Department Store prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for 2017. Dils Brother Department Store Balance Sheet March 31, 2017 Assets Liabilities and Stockholders\' Equity Cash $ 4,000 Accounts payable $31,000 Accounts receivable 31,000 Dividends payable 15,000 Inventory 36,000 Rent payable 3,000 Prepaid Insurance 3,000 Stockholders\' equity 50,000 Fixtures 25,000 Total assets $99,000 Total liabilities and equity $99,000 Actual and forecasted sales for selected months in 2017 are as follows: Month Sales Revenue January $ 70,000 February 60,000 March 50,000 April 60,000 May 70,000 June 80,000 July 100,000 August 90,000 Monthly operating expenses are as follows: Wages and salaries $ 27,000 Depreciation 100 Utilities 1,500 Rent 3,000 Cash dividends of $15,000 are declared during the third month of each quarter and are paid during the first month of the following quarter. Operating expenses, except insurance, rent, and depreciation are paid as incurred. Rent is paid during the following month. The prepaid insurance is for five more months. Cost of goods sold is equal to 50 percent of sales. Ending inventories are sufficient for 120 percent of the next month\'s cost of sales. Purchases during any given month are paid in full during the following month. All sales are on account, with 50 percent collected during the month of sale, 40 percent during the next month, and 10 percent during the month thereafter. Money can be borrowed and repaid in multiples of $1,000 at an interest rate of 12 percent per year. The company desires a minimum cash balance of $4,000 on the first of each month. At the time the principal is repaid, interest is paid on the portion of principal that is repaid. All borrowing is at the beginning of the month, and all repayment is at the end of the month. Money is never repaid at the end of the month it is borrowed. (a) Prepare a purchases budget for each month of the second quarter ending June 30, 2017. Dils Brothers Department Store Monthly Purchase Budget Quarter Ending June 30, 2017 April May June Total Budgeted purchases $Answer $Answer $Answer $Answer (b) Prepare a cash receipts schedule for each month of the second quarter ending June 30, 2017. Do not include borrowings. Dils Brothers Department Store Schedule of Monthly Cash Receipts Quarter Ending June 30, 2017 April May June Total Total cash receipts $Answer $Answer $Answer $Answer (c) Prepare a cash disbursements schedule for each month of the second quarter ending June 30, 2017. Do not include repayments of borrowings. Dils Brothers Department Store Schedule of Monthly Cash Disbursements Quarter Ending June 30, 2017 April May June Total Total cash disbursements $Answer $Answer $Answer $Answer (d) Prepare a cash budget for each month of the second quarter ending June 30, 2017. Include budgeted borrowings and repayments. Only us.

1. Developing a Master Budget for a Merchandising Organization
Dils Brother Department Store prepares budgets quarterly. The following information is
available for use in planning the second quarter budgets for 2017.
Dils Brother Department Store
Balance Sheet
March 31, 2017
Assets
Liabilities and Stockholders' Equity
Cash
$ 4,000
Accounts payable
$31,000
Accounts receivable
31,000
Dividends payable
15,000
Inventory
36,000
Rent payable
3,000
Prepaid Insurance
3,000
Stockholders' equity
50,000
Fixtures
25,000
Total assets
$99,000
Total liabilities and equity
$99,000
Actual and forecasted sales for selected months in 2017 are as follows:
Month
Sales Revenue
January

2. $ 70,000
February
60,000
March
50,000
April
60,000
May
70,000
June
80,000
July
100,000
August
90,000
Monthly operating expenses are as follows:
Wages and salaries
$ 27,000
Depreciation
100
Utilities
1,500
Rent
3,000
Cash dividends of $15,000 are declared during the third month of each quarter and are paid
during the first month of the following quarter. Operating expenses, except insurance, rent, and
depreciation are paid as incurred. Rent is paid during the following month. The prepaid insurance
is for five more months. Cost of goods sold is equal to 50 percent of sales. Ending inventories are
sufficient for 120 percent of the next month's cost of sales. Purchases during any given month
are paid in full during the following month. All sales are on account, with 50 percent collected
during the month of sale, 40 percent during the next month, and 10 percent during the month
thereafter. Money can be borrowed and repaid in multiples of $1,000 at an interest rate of 12
percent per year. The company desires a minimum cash balance of $4,000 on the first of each
month. At the time the principal is repaid, interest is paid on the portion of principal that is
repaid. All borrowing is at the beginning of the month, and all repayment is at the end of the
month. Money is never repaid at the end of the month it is borrowed.

3. (a) Prepare a purchases budget for each month of the second quarter ending June 30, 2017.
Dils Brothers Department Store
Monthly Purchase Budget
Quarter Ending June 30, 2017
April
May
June
Total
Budgeted purchases
$Answer
$Answer
$Answer
$Answer
(b) Prepare a cash receipts schedule for each month of the second quarter ending June 30, 2017.
Do not include borrowings.
Dils Brothers Department Store
Schedule of Monthly Cash Receipts
Quarter Ending June 30, 2017
April
May
June
Total
Total cash receipts
$Answer
$Answer

4. $Answer
$Answer
(c) Prepare a cash disbursements schedule for each month of the second quarter ending June 30,
2017. Do not include repayments of borrowings.
Dils Brothers Department Store
Schedule of Monthly Cash Disbursements
Quarter Ending June 30, 2017
April
May
June
Total
Total cash disbursements
$Answer
$Answer
$Answer
$Answer
(d) Prepare a cash budget for each month of the second quarter ending June 30, 2017. Include
budgeted borrowings and repayments.
Only use negative signs, if needed, for: excess receipts over disbursements, balance before
borrowings and cash balances (beginning and ending).
Dils Brothers Department
Store Monthly Cash Budget
Quarter Ending June 30, 2017

5. April
May
June
Total
Cash balance, beginning
$Answer
$Answer
$Answer
$Answer
Receipts
Answer
Answer
Answer
Answer
Disbursements
Answer
Answer

6. Answer
Answer
Excess receipts over disb.
Answer
Answer
Answer
Answer
Balance before borrowings
Answer
Answer
Answer
Answer
Borrowings
Answer

7. Answer
Answer
Answer
Loan repayments
Answer
Answer
Answer
Answer
Cash balance, ending
$Answer
$Answer
$Answer
$Answer

8. (e) Prepare an income statement for each month of the second quarter ending June 30, 2017.
Only use negative signs to show net losses for income.
Dils Brothers Department Store
Budgeted Monthly Income Statements
Quarter Ending June 30, 2017
April
May
June
Total
Sales
$Answer
$Answer
$Answer
$Answer
Cost of sales
Answer
Answer
Answer
Answer
Gross profit

9. Answer
Answer
Answer
Answer
Operating expenses:
Wages and salaries
Answer
Answer
Answer
Answer
Depreciation
Answer
Answer
Answer

10. Answer
Utilities
Answer
Answer
Answer
Answer
Rent
Answer
Answer
Answer
Answer
Insurance
Answer
Answer

11. Answer
Answer
Interest
Answer
Answer
Answer
Answer
Total expenses
Answer
Answer
Answer
Answer
Net income
$Answer

12. $Answer
$Answer
$Answer
(f) Prepare a budgeted balance sheet as of June 30, 2017.
Dils Brothers Department Store
Budgeted Balance Sheet
June 30, 2017
Assets
Liabilities and Equity
Cash
$Answer
Merchandise payable
$Answer
Accounts receivable
Answer
Dividend payable
Answer
Inventory
Answer
Rent payable

13. Answer
Prepaid insurance
Answer
Loans payable
Answer
Fixtures
Answer
Interest payable
Answer
Total assets
$Answer
Stockholders' equity
Answer
Total liab. & equity
$Answer
Dils Brother Department Store
Balance Sheet
March 31, 2017
Assets
Liabilities and Stockholders' Equity

14. Cash
$ 4,000
Accounts payable
$31,000
Accounts receivable
31,000
Dividends payable
15,000
Inventory
36,000
Rent payable
3,000
Prepaid Insurance
3,000
Stockholders' equity
50,000
Fixtures
25,000
Total assets
$99,000
Total liabilities and equity
$99,000
Solution
Part 1 - Presentation of Purchase Budget
Dils Brother Department Store
Purchase Budget
Quarter Ending June 30, 2017
$30000
($60000*50%)
$35000
($70000*50%)
$40000
($80000*50%)
$42000

15. ($35000*120%)
$48000
($40000*120%)
$60000
($100000*50%*120%)
$36000
($60000*50%*120%)
Part 2 - Presentation of cash receipt schedule
Dils brother department store
Schedule of cash receipts
Quarter ending June 30, 2017
$30000
($60000*50%) of april month
$35000
($70000*50%) of may month
$40000
($80000*50%) of june month
$20000
($50000*40%) of march month
$24000
($60000*40%) of april month
$28000
($70000*40%) of may month
$6000
($60000*10%) of february monrh
$5000
($50000*10%) of March month
$6000
($60000*10%) of april month
Part 3 - Presentation of cash disbursement schedule
Dils brother department store
Schedule of cash disbursements
Quarter ending June 30, 2017
Part - Presentation of Cash Budget
Dils Brother department Store
Cash Budget

16. Quarter ending June 30, 2017
($1030)
($1000) + ($1000*12%*3/12)ParticularsAprilMayJuneTotalCost of sales (50% of sales)
$30000
($60000*50%)
$35000
($70000*50%)
$40000
($80000*50%)$105000Add : Ending Inventory desired (120% of next month cost of sales)
$42000
($35000*120%)
$48000
($40000*120%)
$60000
($100000*50%*120%)$150000Total Inventory required$72000$83000$100000$255000Less :
Opening Inventory
$36000
($60000*50%*120%)$42000 (Closing of April)$48000 (closing of May)$126000Budgeted
Purchases$36000$41000$52000$129000