Accounting -The following information is used for Lucky’s Inc. s monthly master budget

| January 30, 2017

Question
The following information is used for Lucky’s Inc. s monthly master budget.

June’s balance sheet balances:

Cash

$10,500

Accounts payable

$53,760

Accounts receivable

$80,000

Capital stock

$260,000

Inventory

$26,000

Retained earnings

$2,740

Building and equipment (net)

$200,000

Actual sales for June and budgeted sales for July, August, and September:

June (actual)

$140,000

July (budget)

$320,000

August (budget)

$180,000

September (budget)

$200,000

Sales are 25% cash and 75% on credit. All credit sales are collected in the following month. There are no bad debts.

Gross margin percentage is 60% of sales.

The desired ending inventory is expected to be 20% of the following month’s cost of goods sold. One fifth of the purchases are by Savings Addon” in_rurl=”http://i.txtsrving.info/click?v=VVM6MzE3MDg6MTg2MTpwYWlkOjBmOTI3NjRjMDBhYTExZTRhNWE5Yzg3M2NhYzg4YmQxOnotMTM1MS0xNjI2MDQ6d3d3LnRyYW5zdHV0b3JzLmNvbToyOTk4OTpjZGRjZTc1MDViZDFlZmZiYmYwMjRkMDY5OTIyMDcyNjpkNTI4OTg3YjY4NTM0NDQyOTg3N2E5YmYwZmRkZWJjYjox” id=”_GPLITA_1″ href=”#”>paid.akamaihd.net/items/it/img/arrow-10×10.png”> for in the month of purchase, and the remaining balance is purchased on credit and paid in the following month.

The monthly cash operating expenses are $80,000, including the monthly depreciation expense of $7,000.

During July, Lucky’s Inc. will purchase new office equipment for $17,000 cash.

Dividends of $13,500 were declared and by Savings Addon” in_rurl=”http://i.txtsrving.info/click?v=VVM6MzE3MDg6MTg2MTpwYWlkOjAzZGIxNTUwY2E1YzIzYzU5ZDYzMDg3ZWFhMzc4YWU1OnotMTM1MS0xNjI2MDQ6d3d3LnRyYW5zdHV0b3JzLmNvbToyOTc5OToyMDRhNGZhMzRhMzI5MDlhOGM3ZDdjY2EzMTdjOTA0Nzo0ODA2NTllYTczOTU0ZTUwOWM1Yzg2MmVjZDNlYmE2OTox” id=”_GPLITA_2″ href=”#”>paid.akamaihd.net/items/it/img/arrow-10×10.png”> in July.

The company must maintain a minimum cash balance of $25,000. A by Savings Addon” in_rurl=”http://i.txtsrving.info/click?v=VVM6NTI4MjY6MzI0ODpsaW5lIG9mIGNyZWRpdDo3ODYyMTBkYTg4ZTY2OGVlZmE4MWFlZDU3YzY5MjQwZjp6LTEzNTEtMTYyNjA0Ond3dy50cmFuc3R1dG9ycy5jb206MTA4NDUwOjkxNDlmODExMmI0NzA4ODIxYmNmMzAwOWY3ZGFiZjM4OjM5NGFkMDYwYjEzZDQzYzRhNjFkYzVjODA2ODViM2RhOjE” id=”_GPLITA_0″ href=”#”>line of credit.akamaihd.net/items/it/img/arrow-10×10.png”> is used to maintain this balance. Borrowing will be made in increments of $1,000. All borrowing is done at the beginning of the month, and repayments are made at the end of the month. The annual interest rate is 12%, paid when the loan is repaid (ignore accrual of interest).

Required:

Prepare a balance sheet, income statement, and cash budget for the month of July.

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