Managerial Accounting

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Managerial Accounting

Group Project – Excel Budgeting

50 points

Using MS Excel and the information provided below for Isle Corporation:

Prepare a master budget for each of the first three months of 2014; include the following component budgets (show supporting calculations as needed 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.

5. Monthly capital expenditures budgets.

6. Monthly cash budgets.

7. Budgeted income statement for the entire first quarter (not for each month).

8. Budgeted balance sheet as of March 31, 2014.

· If you are not familiar with Excel or you need a refresher, go to

http://people.usd.edu/~bwjames/tut/excel/

for a tutorial. The tutorial is also available to you in Student Resources on the Course Menu in Blackboard.

· You must use cell references wherever possible when you are building your spreadsheets. This includes using them in your formulas as well. Not doing so will cost you points.

· Typing computational results in the cells is not acceptable and will result in zero points.

· Submit one Excel worksheet using the tabs at the bottom left for each budget. Be sure to name the tabs appropriately (see below).

· Copying another group’s work is not allowed as part of Academic Integrity and will result in a zero for all parties involved. Do not share your work with other groups as you don’t know what their intentions may be and you will suffer the same penalty as them in the case of copying.

Assignments submitted late will suffer a 20% penalty. Late assignments will be accepted no later than one day after the deadline.

Near the end of 2013, the management of Isle Corporation, a merchandising company, prepared the following estimated balance sheet for December 31, 2013.

To prepare a master budget for January, February, and March of 2014, management gathers the following information.

1. Isle Corp.’s single product is purchased for $30 per unit and resold for $45 per unit. The expected inventory level of 5,000 units on December 31, 2013, is more than management’s desired level for 2014, which is 25% of the next month’s expected sales (in units). Expected sales are: January, 6,000 units; February, 8,000 units; March, 10,000 units; and April, 9,000 units.

2. Cash sales and credit sales represent 25% and 75%, respectively, of total sales. Of the credit sales, 60% is collected in the first month after the month of sale and 40% in the second month after the month of sale. For the $525,000 accounts receivable balance at December 31, 2013, $315,000 is collected in January 2014 and the remaining $210,000 is collected in February 2014.

3. Merchandise purchases are paid for as follows: 20% in the first month after the month of purchase and 80% in the second month after the month of purchase. For the $360,000 accounts payable balance at December 31, 2013, $72,000 is paid in January 2014 and the remaining $288,000 is paid in February 2014.

4. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $90,000 per year.

5. General and administrative salaries are $144,000 per year. Maintenance expense equals $3,000 per month and is paid in cash.

6. Equipment reported in the December 31, 2013, balance sheet was purchased in January 2013. It is being depreciated over 8 years under the straight-line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter: January, $72,000; February, $96,000; and March, $28,800. This equipment will be depreciated using the straight-line method over 8 years with no salvage value. A full month’s depreciation is taken for the month in which equipment is purchased.

7. The company plans to acquire land at the end of March at a cost of $150,000, which will be paid with cash on the last day of the month.

8. Isle Corp. 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. Isle has agreed to maintain a minimum ending cash balance of $36,000 in each month.

9. The income tax rate for the company is 40%. Income taxes on the first quarter’s income will not be paid until April 15.

Check Figures:

(2) Budgeted purchases: January, $90,000; February, $255,000

(3) Budgeted selling expenses: January, $61,500; February, $79,500

(6) Ending cash balance: January, $182,850; February, $107,850

(8) Budgeted total assets at March 31, $1,346,875