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149. Sweeny Co. is preparing a cash budget for the second quarter of the coming year. The
following data have been forecasted:
April May
Sales ………………………………………………. $150,000 $157,500
Merchandise purchases …………………………… 107,000 112,400
Operating expenses:
Payroll …………………………………………. 13,600 14,280
Advertising ……………………………………. 5,400 5,700
Rent ……………………………………………. 1,500 1,500
Depreciation …………………………………… 7,500 7,500
End of April balances:
Cash ……………………………………………. 40,000
Bank loan payable ……………………………… 16,000
Additional data:
(1) Sales are 40% cash and 60% credit. The collection pattern for credit sales is 50% in the
month following the sale and 50% in the month thereafter. Total sales in March were
$125,000.
(2) Purchases are all on credit, with 40% paid in the month of purchase and the balance paid
in the following month.
(3) Operating expenses are paid in the month they are incurred.
(4) A minimum cash balance of $40,000 is required at the end of each month.
(5) Loans are used to maintain the minimum cash balance. At the end of each month, interest
of 1% per month is paid on the outstanding loan balance as of the beginning of the month.
Repayments are made whenever excess cash is available.
Prepare the company's cash budget for May. Show the ending loan balance at May 31.
150. Peru, Inc. is preparing its master budget for the first quarter of its calendar year. The
following forecasted data relate to the first quarter:
Unit sales:
January …………………………….. 40,000
February …………………………… 60,000
March ……………………………… 50,000
Unit sales price ………………………. $25
Cost of goods sold per unit …………... $14
Expenses:
Commissions ……………………… 10% of sales
Rent ……………………………….. $20,000/month
Advertising ……………………….. 15% of sales
Office salaries …………………….. $75,000/month
Depreciation ………………………. $50,000/month
Interest …………………………….. 15% annually on a $250,000 note payable
Tax rate 40%
Prepare a budgeted income statement for this first quarter.
151. The production budget for Sergei Company revealed the following production volume
for the months of July – September. Each unit produced requires 2 hours of direct labor. The
direct labor rate is currently $16 per hour but is predicted to be $16.75 per hour in September.
Prepare a direct labor budget for Sergei Company for July – September.
July Aug Sept
Units to be produced 620 680 540
152. David, Inc., is preparing its master budget for the second quarter. The following sales
and production data have been forecasted:
April May June July August
Unit sales …… 400 500 520 480 540
Finished goods inventory on March 31: 120 units
Raw materials inventory on March 31: 450 pounds
Desired ending inventory each month:
Finished goods: 30% of next month's sales
Raw materials: 25% of next month's production needs
Number of pounds of raw material required per finished unit: 4 lb.
How many pounds of raw materials should be purchased in April?
153. Clic, Inc., provides the following data for the next four months:
April May June July
Units Sales …………………………… 500 580 530 600
Ending Raw Materials Inventory ……. 663 lbs.
Ending Finished Goods Inventory …... 174 Units
Desired Ending Inventory:
Raw Materials = 30% of next month's production needs
Finished Goods = 20% of next month's sales
Pounds of raw material required for each finished Unit = 5 lbs.
Required:
Calculate the amount of purchases of raw materials in pounds for April and May.
154. Use the following information to prepare the June cash budget for Arbor Company. It
should show expected cash receipts and cash disbursement for the month and the cash balance
expected on June 30.
a. Beginning cash balance on June 1 is $52,000.
b. Cash receipts from sales: 40% is collected in the month of sale, 50% in the next month, and
10% in the second month after sale (uncollectible accounts are negligible and can be ignored).
Sales amounts are: April (actual), $1,450,000, May (actual), $1,600,000, and June (budgeted),
$1,700,000.
c. Payments on merchandise purchases: 80% in the month of purchase and 20% in the month
following purchase. Purchases amounts are May (actual), $830,000; and June (budgeted),
$867,000.
d. Budgeted cash disbursements for salaries in June: $260,000.
e. Budgeted depreciation expense for June: $24,000.
f. Other cash expenses budgeted for June: $282,000.
g. Accrued income taxes due in June: $48,000.
h. Bank loan interest due in June: $8,000.
i. Loan payment of $50,000 if the preliminary cash balance is greater than $100,000.
155. Use the following information to prepare a budgeted income statement for Arbor
Company for the month of June.
a. Beginning cash balance on June 1 is $52,000.
b. Cash receipts from sales: 40% is collected in the month of sale, 50% in the next month, and
10% in the second month after sale (uncollectible accounts are negligible and can be ignored).
Sales amounts are: April (actual), $1,450,000, May (actual), $1,600,000, and June (budgeted),
$1,700,000.
c. Payments on merchandise purchases: 80% in the month of purchase and 20% in the month
following purchase. Purchases amounts are May (actual), $830,000; and June (budgeted),
$867,000.
d. Budgeted cash disbursements for salaries in June: $260,000. Salaries payable on May 31
are $60,000 and are expected to be $50,000 on June 30.
e. Budgeted depreciation expense for June: $24,000.
f. Other cash expenses budgeted for June: $282,000.
g. Accrued income taxes due in June: $48,000.
h. Bank loan interest due in June: $8,000 which represents the 1% monthly expense on a bank
loan of $800,000.
i. Loan payment of $50,000 if the preliminary cash balance is greater than $100,000.
j. Cost of goods sold is 53% of sales.
k. The income tax rate applicable to the company is 30%.
156. Use the following information to prepare a budgeted balance sheet Magee Company for
the month of June.
a. The budgeted net income for the month of June is $236,000.
b. The beginning cash balance is $62,000; budgeted cash receipts are $1,660,000; budgeted
cash disbursements are $1,580,000.
c. Budgeted sales for May and June are $1,600,000 and $1,700,000 respectively. Collections
are 40% in the month of sale and 60 % in the month following.
d. The projected inventory balance is 10% of the following month’s sales. Sales for July are
projected to be $1,750,000.
e. Purchases of inventory are paid 80% in the month of purchase, and 20% in the month
following. Budgeted purchases for June are $900,000.
f. The equipment account balance is $1,400,000 on June 30. On May 31, the accumulated
depreciation on equipment is $276,000. Depreciation expense for June is estimated to be
$24,000.
g. There is an outstanding loan balance of $800,000.
h. Accrued income taxes payable for June 30 are $71,000; and accrued salaries payable are
$50,000.
i. The only other balance sheet accounts are: Common Stock, with a balance of $800,000 on
May 31, and Retained Earnings with a balance of $300,000 on May 31.
Fill in the Blank Questions
157. There are at least five benefits from budgeting. Identify two of these benefits:
(1) _______________________________________
(2) _______________________________________
158. The budget process is usually administered by a _____________________.
159. There are three major subgroups of the master budget. These are _________________,
___________________, and _______________________.
160. A ________________________ is a continuously revised budget that adds future months
or quarters to replace months or quarters that have lapsed.
161. The master budget process nearly always begins with the preparation of the
___________________ and usually finishes with the preparation of the
______________________, the ________________, and the ______________________.
162. ___________________________ is a budget system based on expected activities and
their levels that enables management to plan for resources required to perform the activities.
163. The budget that lists the dollar amounts to be both received from plant asset disposals
and spent to purchase additional plant assets to carry out the budgeted business activities is
the __________________________.
164. The ___________ shows expected cash inflows and outflows during the budget period.
165. The ___________________________ is prepared by manufacturing firms, and takes the
place of the purchases budget prepared by merchandising firms.
166. The ______________________________ shows the budgeted costs for direct materials,
direct labor, and overhead, based on the budgeted production volume from the production
budget.
