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ATC 14-1
a.
Budgeted
Financial Statements
Income Statement
Amounts
Computations
Sales Revenue
$300,000
12 x $25,000
Cost of Goods Sold
(264,000)
12 x $22,000
Depreciation Expense
(3,000)
($18,000 – $6,000) ÷ 4
Other Expense
(4,000)
$22,000 – $18,000
Operating Income
29,000
Interest Expense
(850)
$17,000 x .05
Net Income
$28,150
Statement of Cash Flows
Operating Activities:
Inflows from sales
$300,000
12 x $25,000
Outflows for:
Purchase of food, etc.
(264,000)
12 x $22,000
Other initial expenses
(4,000)
$22,000 – $18,000
Interest Expense
(850)
$17,000 x .05
NCF Operating Activities
31,150
Investing Activities:
Outflow for purchase of
cart
(18,000)
given
Financing Activities”
Inflows from:
Contribution by owners
5,000
given
Loan from parents
17,000
given
Financing Act.
22,000
Net Change in Cash
35,150
Plus beginning cash
0
Ending cash balance
$35,150
ATC 14-1 (continued)
Budgeted
Financial Statements
continued
Balance Sheet
Amounts
Computations
Cash
$35,150
from SCF
Food cart
18,000
given
Acc. Depreciation
(3,000)
($18,000 – $6,000) ÷ 4
Total Assets
$50,150
Note Payable
$17,000
given
Contributed Capital
5,000
given
Retained Earn.
28,150
from Inc. Statement
Total Liab. & Equity
$50,150
b. The budget financial statements above assume sales for each month of the year will be
approximately equal to sales for September and October. Most likely, sales will be
pay their living expenses.
ATC 14-2
a. Group Tasks
Task 1
Pro Forma
October
November
December
Data
Cash sales
$ 40,000
$ 44,000
$ 48,400
Sales on account
140,000
154,000
169,400
$169,400
Accounts Rec.
Total budgeted sales
$180,000
$198,000
$217,800
595,800
Sales Rev.
Schedule of Cash Receipts
October
November
December
Cash sales
$ 40,000
$ 44,000
$ 48,400
Collections from accounts receivable
60,000
140,000
154,000
Total cash collections
$100,000
$184,000
$202,400
Task 2
Pro Forma
Oct.
Nov.
Dec.
Data
Budgeted cost of goods sold
$72,000
$79,200
$87,120
$238,320
Cost of Goods Sold
Plus: Desired ending inventory
14,400
15,840
17,424
17,424
Ending Inventory
Inventory needed
86,400
95,040
104,544
Less: Beginning inventory
40,000
14,400
15,840
Required purchases (on account)
$46,400
$80,640
$88,704
22,176
Accounts Payable
Schedule of Cash Payments Budget for Inventory Purchases
October
November
December
Pmt of current month's accts. pay.
$34,800
$60,480
$66,528
Pmt for prior month's accts. pay.
72,000
11,600
20,160
Total budgeted pmts. for inventory
$106,800
$72,080
$86,688
ATC 14-2
Task 3
Pro Forma
Oct.
Nov.
Dec.
Data
Sales commissions
$ 7,200
$ 7,920
$ 8,712
$ 8,712
Commissions pay.
Supplies expense
1,800
1,980
2,178
Utilities
2,200
2,200
2,200
2,200
Utility payable
Depreciation on store equipment
1,600
1,600
1,600
4,800
Accum. dep.
Salary expense
34,000
34,000
34,000
Rent
6,000
6,000
6,000
Miscellaneous
1,000
1,000
1,000
b. Financial Statements
Income Statement
Sales revenue
$595,800
Cost of goods sold
(238,320)
Gross margin
357,480
Operating expenses
(164,190)
Operating income
193,290
Interest expense
(2,530)
Net income
$190,760
ATC 14-2 (continued)
Balance Sheet
Assets
Cash
$ 9,760
Accounts receivable
169,400
Inventory
17,424
Store equipment
$200,000
Accumulated depreciation store equipment
(81,600)
Book value of store equipment
118,400
Total assets
$314,984
Liabilities
Accounts payable
$ 22,176
Utilities payable
2,200
Sales commissions payable
8,712
Line of credit
23,936
Equity
Common stock
50,000
Retained earnings
207,960
Total liabilities and equity
$314,984
c. Havel will need to borrow money in October.
Cash Budget for October
Beginning cash balance
$ 16,000
Add: Cash receipts
100,000 (1)
Cash available
116,000
Less: Payments
Total S&A expenses
$53,800
$54,700
$55,690
$164,190
S&A Exp.
For inventory purchases
106,800 (2)
For S&A expenses
42,800 (3)
Total budgeted payments
149,600
Payments minus receipts = shortage
$ 33,600
ATC 14-2 (continued)
(1) $40,000 cash sales + $60,000 collection on September accounts receivable.
ATC 14-3
a. There was a budgeted surplus in 6 years of in the 53 years from 1960 to 2011: 1960,
1969, 1998, 1999, 2000, 2001. Thus, a deficit was reported in 47 years.
c. For 2009: Deficit $1,412,688
Receipts $2,104,989
d. The departments whose budgets changed the most from the Clinton years to the
Bush years were:
Treasury 4.6 decrease
Health and Human Services 2.5 increase
Defense—Military 2.4 increase
ATC 14-3 continued
Comparison of Average Budget Percentages by Department for 1994 - 2001 (Clinton
Years) to 2002 – 2009 (Bush Years)
Average
Average
for
for
Clinton
Bush
Years
Years
Difference
Legislative Branch
0.2
0.2
0.0
Judicial Branch
0.2
0.2
0.0
Department of Agriculture
3.7
3.3
-0.4
Department of Commerce
0.3
0.3
0.0
Department of Defense--Military Programs
16.2
18.6
2.4
Department of Education
1.9
2.5
0.6
Department of Energy
1.0
0.8
-0.2
Department of Health and Human Services
20.9
23.4
2.5
Department of Homeland Security
0.7
1.5
0.8
Department of Housing and Urban Development
1.8
1.7
-0.1
Department of the Interior
0.4
0.4
-0.1
Department of Justice
0.8
1.0
0.2
Department of Labor
2.1
2.5
0.4
Department of State
0.4
0.5
0.1
Department of Transportation
2.3
2.4
0.0
Department of the Treasury
22.4
17.8
-4.6
Department of Veterans Affairs
2.5
2.7
0.2
Corps of Engineers--Civil Works
0.2
0.2
0.0
Other Defense Civil Programs
1.9
1.7
-0.2
Environmental Protection Agency
0.4
0.3
-0.1
Executive Office of the President
0.2
0.2
General Services Administration
0.1
-0.1
International Assistance Programs
0.6
0.5
-0.1
National Aeronautics and Space Administration
0.9
0.6
-0.2
National Science Foundation
0.2
0.2
0.0
Office of Personnel Management
2.7
2.4
-0.4
Small Business Administration
0.1
0.1
0.0
Social Security Administration (On-Budget)
2.2
2.1
-0.1
Social Security Administration (Off-Budget)
22.1
20.5
-1.6
Other Independent Agencies (On-Budget)
0.3
0.8
0.6
Other Independent Agencies (Off-Budget)
0.1
0.0
-0.1
Allowances
Undistributed Offsetting Receipts
-9.4
-9.2
0.1
(On-budget)
-6.2
-5.0
1.2
(Off-budget)
-3.2
-4.2
-1.0
Total outlays
100.0
100.0
0.0
ATC 14-4
challenges.
competition to be held in a given year.
• Many of the USOC’s revenues are not correlated with activities that cause it to
incur expenses, as is the case with business enterprises. Thus, just because revenues
are down it does not mean that expenses will also decline.
• Any grants from government sources may be affected by politics.
• Games may be disrupted by international events over which the USOC has no
control or event the ability to predict. These events can reduce revenue
unexpectedly.
ATC 14-5
a. Mr. Cleaver’s behavior could be construed to be in violation of the objectivity
standards. The failure to disclose the lack of need for computers to the Board of
Education would violate (1) the standard to communicate information fairly and
objectively and (2) the standard to disclose fully all relevant information that could
b. As its name implies, participative budgeting encourages participation by
subordinates as well as upper level managers in the budget process. Information
