Baird Pointers Corporation expects to begin operations on January 1, Year 1; it will operate as a specialty sales company that sells laser pointers over the Internet. Baird expects sales in January Year 1 to total $340,000 and to increase 20 percent per month in February and March. All sales are on account. Baird expects to collect 66 percent of accounts receivable in the month of sale, 24 percent in the month following the sale, and 10 percent in the second month following the sale. Required Prepare a sales budget for the first quarter of Year 1. Determine the amount of sales revenue Baird will report on the Year 1 first quarterly pro forma income statement. Prepare a cash receipts schedule for the first quarter of Year 1. Determine the amount of accounts receivable as of March 31, Year 1.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Baird Pointers Corporation expects to begin operations on January 1, Year 1; it will operate as a specialty sales company that sells laser pointers over the Internet. Baird expects sales in January Year 1 to total $340,000 and to increase 20 percent per month in February and March. All sales are on account. Baird expects to collect 66 percent of accounts receivable in the month of sale, 24 percent in the month following the sale, and 10 percent in the second month following the sale.
Required
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Prepare a sales budget for the first quarter of Year 1.
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Determine the amount of sales revenue Baird will report on the Year 1 first quarterly pro forma income statement.
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Prepare a cash receipts schedule for the first quarter of Year 1.
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Determine the amount of accounts receivable as of March 31, Year 1.
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