Exercise 20–30 (10 minutes)
HECTOR COMPANY
Budgeted Cash Payments
For August and September
August
Sept.
Payments for:
Merchandise* ………………………………………………………………….
$14,400
$19,200
Selling expenses (10% of sales) ………………………………………
7,200
6,600
Administrative expenses (8% of sales) …………………………..
5,760
5,280
Rent expense ………………………………………………………………….
7,400
7,400
Exercise 20-31 (25 minutes)
CASTOR, INC.
Cash Budget
For April, May, and June
April
May
Beginning cash balance* ……………………….
$12,000
$12,000
Cash receipts**………………………………………
28,000
36,000
Total cash available ………………………………
40,000
48,000
Cash payments for:
Merchandise ………………………………………….
20,200
16,800
Sales commissions (10% of sales) …………
3,200
4,000
Shipping (2% of sales) …………………………..
640
800
Office salaries ……………………………………….
Rent ………………………………………………………
Interest on bank loan
$18,339
Additional loan from bank ……………………..
Repayment of loan to bank …………………….
5,000
3,000
5,000
3,000
Exercise 20-31 (continued)
CASTOR, INC.
Cash Receipts Budget
For April, May, and June
April
May
Sales ……………………………………………………..
$32,000
$40,000
Less ending accts. receivable (50%) ………
16,000
20,000
Cash receipts from:
Cash sales (50% of sales) ……………………..
16,000
20,000
16,000
20,000
Exercise 20-32 (30 minutes)
(1)
KELSEY
Cash Receipts Budget
For July, August, and September
July
August
Sales ……………………………………………………..
$64,000
$80,000
Less ending accts. receivable (80%) ………
51,200
64,000
Cash receipts from:
Cash sales (20% of sales) ……………………..
16,000
Exercise 20-32 (continued)
(2)
KELSEY
Cash Budget
For July, August, and September
July
August
Sept.
Beginning cash balance* ……………………….
$15,000
$15,000
$25,504
Cash receipts (from part 1) …………………….
57,800
67,200
73,600
Total cash available ………………………………
72,800
82,200
99,104
Cash payments for:
Merchandise ………………………………………….
40,400
33,600
34,400
Sales commissions (10% of sales) …………
6,400
8,000
4,800
Office salaries ……………………………………….
Rent ………………………………………………………
4,000
6,500
4,000
6,500
4,000
6,500
Exercise 20-33 (15 minutes)
ZETROV COMPANY
Budgeted Balance Sheet
As of March 31
ASSETS
Cash ……………………………………………………………………..
$ 50,000
Accounts receivable ($140,000 x 70%) ………………………..
98,000
Merchandise inventory (600 units x $35) ……………………
21,000
Total current assets ……………………………………………….
169,000
Equipment …………………………………………………………….
$84,000
Less accumulated depreciation (note 1) ………………….
47,000
37,000
Total assets ……………………………………………………….
$206,000
LIABILITIES AND EQUITY
Liabilities
$89,000
81,000
Supporting calculations
(1) Accumulated depreciation
Beginning ……………………………………………………….
$46,000
Depreciation expense …………………………..
1,000
Ending ……………………………………………………….
$47,000
Beginning ……………………………………………………….
$ 8,000
Net income ……………………………………………………….
Ending ……………………………………………………….
$56,000
Exercise 20-34 (15 minutes)
FORTUNE, INC.
Budgeted Income Statement
For Quarter Ended March 31
Sales (note 1) ……………………………………………………………
$3,750,000
Cost of goods sold (note 2) ………………………………………
2,100,000
Gross profit ……………………………………………………………
1,650,000
Operating expenses
Commissions expense (8% of sales) ………………………..
$300,000
Rent expense ($14,000 x 3) ………………………………………
42,000
Advertising expense (15% of sales) ………………………….
562,500
Depreciation expense ($40,000 x 3) ………………………….
Income before income taxes …………………………………..
397,375
Income tax expense (note 3) ……………………………………..
119,213
Net income ……………………………………………………………..
$ 278,162
Supporting calculations
(1) Sales
Unit sales (45,000 + 55,000 + 50,000) ………….
150,000
Unit price …………………………………………………
$25
Sales dollars …………………………………………….
$3,750,000
(2) Cost of goods sold
Unit sales (45,000 + 55,000 + 50,000) ………….
150,000
Unit cost…………………………………………………..
(3) Income tax expense
Pre-tax income …………………………………………
$ 397,375
Tax rate ……………………………………………………
30%
Income tax expense ………………………………….
$ 119,213*
* Rounded to the nearest dollar.
Exercise 20-35 (15 minutes)
RENDER CO. CPA
Activity-Based Budget
For Year Ending December 31, 2019
Budgeted
Hours
Budgeted
Price/hour
Budgeted
Cost
Data-entry ……………………………………………..
2,200
$15
$ 33,000
Auditing ………………………………………………..
4,800
30
144,000
PROBLEM SET A
Problem 20-1A (40 minutes)
Part 1
BLACK DIAMOND COMPANY
Production Budget (in units)
Third Quarter
Budgeted ending inventory (skis) …………………………………………………
3,500
Add budgeted sales ……………………………………………………………………..
150,000
Required units of available production …………………………………………
153,500
Deduct beginning inventory (skis) …………………………..……………………
(5,000)
Units to be manufactured ……………………………………………………….
148,500
Part 2
BLACK DIAMOND COMPANY
Direct Materials Budget (in lbs, except where noted)
Third Quarter
Problem 20-1A (concluded)
Part 3
BLACK DIAMOND COMPANY
Direct Labor Budget
Third Quarter
Units to be produced ………………………………………………………
148,500
Labor requirements per unit (hours) …………………………..
x 0.50
Total labor hours needed ………………………………………………..
74,250
Direct labor rate (per hour) ……………………………………………..
x $20
Budgeted direct labor cost ……………………………………………..
$1,485,000
Part 4
BLACK DIAMOND COMPANY
Factory Overhead Budget
Third Quarter
Variable overhead rate per DL hour …………………………………
Problem 20-2A (30 minutes)
(1)
BUILT-TIGHT
Cash Receipts Budget
For July, August, and September
July
August
Sales ……………………………………………………..
$64,000
$80,000
Less ending accts. receivable (80%) ………
51,200
64,000
Cash receipts from:
Cash sales (20% of sales) ……………………..
16,000
(2)
BUILT-TIGHT
Cash Budget
For July, August, and September
July
August
Sept.
Beginning cash balance* ……………………….
$15,000
$15,000
$25,504
Cash receipts (from part 1) …………………….
57,800
67,200
73,600
Total cash available ………………………………
72,800
82,200
99,104
Cash payments for:
Direct materials ……………………………………..
16,160
13,440
13,760
Direct labor ……………………………………………
4,040
3,360
3,440
Overhead ………………………………………………
20,200
16,800
17,200
Sales commissions (10% of sales) …………
6,400
8,000
4,800
Office salaries ……………………………………….
Rent ………………………………………………………
Interest on bank loan
$30,054
Additional loan from bank ……………………..
Repayment of loan to bank …………………….
450
4,000
6,500
4,000
6,500
4,000
6,500
Problem 20-3A (50 minutes)
Part 1
MERLINE MANUFACTURING
Budgeted Income Statement
For Months of January, February, and March, 2020
January
February
March
Sales* ……………………………………………….
$2,062,500
$2,268,750
$2,495,625
Cost of goods sold* …………………………..
1,237,500
1,361,250
1,497,375
Gross profit ………………………………………
825,000
907,500
998,250
Expenses
Sales commissions (10%) ………………..
206,250
226,875
249,563
Advertising ($250,000 x 1.15) …………..
287,500
287,500
287,500
Store rent ………………………………………..
30,000
30,000
30,000
Administrative salaries ……………………
45,000
45,000
45,000
Depreciation-Office equipment ………..
50,000
50,000
50,000
Other expenses ……………………………….
Total expenses ………………………………….
* Volume for the next three months increases by 10% per month
Sales
Cost of Goods
Units
(@ $125)
Sold (@ $75)
December ($2,250,000/$150) …………………
15,000
January ………………………………………………
16,500
$2,062,500
$1,237,500
February ……………………………………………..
18,150
2,268,750
1,361,250
March ………………………………………………….
19,965
2,495,625
1,497,375
Part 2: Analysis Component
Problem 20-4A (130 minutes)
Part 1
ZIGBY MANUFACTURING
Sales Budgets
April, May, and June 2019
Budgeted
Units
Budgeted
Unit Price
Budgeted
Sales Dollars
April 2019 …………………………..…………………………
20,500
$23.85
$ 488,925
May 2019 ………………………………………………………
19,500
23.85
465,075
June 2019 ……………………………………………………..
20,000
23.85
477,000
Total for the second quarter ………………………….
60,000
$1,431,000
Part 2
ZIGBY MANUFACTURING
Production Budget
April, May, and June 2019
April
May
June
Total
Next month’s budgeted sales ……………
19,500
20,000
20,500
Ratio of inventory to future sales ………
x 80%
x 80%
x 80%
Add budgeted sales ………………………….
Deduct beginning inventory ……………..
Problem 20-4A (continued)
Part 3
ZIGBY MANUFACTURING
Raw Materials Budget
April, May, and June 2019
April
May
June
Total
Material price per unit ………………………
$ 20
$ 20
$ 20
$ 20
$198,000
$201,500
$182,000
$581,500
Part 4
ZIGBY MANUFACTURING
Direct Labor Budget
April, May, and June 2019
April
May
June
Total
Budgeted production (units) …………….
19,700
19,900
20,400
Labor requirements per unit (hours) ….
x 0.50
x 0.50
x 0.50
Total labor hours needed ………………….
9,850
9,950
10,200
30,000
Direct labor rate (per hour) ……………….
$ 15
$ 15
$ 15
$ 15
Budgeted direct labor cost ……………….
$147,750
$149,250
$153,000
$450,000
Part 5
ZIGBY MANUFACTURING
Factory Overhead Budget
April, May, and June 2019
April
May
June
Total
Labor hours needed ………………………..
9,850
9,950
10,200
Variable factory overhead rate …………
x $2.70
x $2.70
x $2.70
Budgeted variable overhead ……………
26,595
26,865
27,540
$ 81,000
Budgeted fixed overhead ………………..
20,000
20,000
20,000
60,000
Budgeted total overhead …………………
$46,595
$46,865
$47,540
$141,000
Problem 20-4A (continued)
Part 6
ZIGBY MANUFACTURING
Selling Expense Budgets
April, May, and June 2019
April
May
June
Total
Budgeted sales …………………………..
$488,925
$465,075
$477,000
Sales commission percent ………………
x 8%
x 8%
x 8%
Sales commissions expense ……………
39,114
37,206
38,160
$114,480
Sales salaries………………………………….
3,000
3,000
3,000
9,000
Total budgeted selling expenses ……..
$ 42,114
$ 40,206
$ 41,160
$123,480
Part 7
ZIGBY MANUFACTURING
General and Administrative Expense Budgets
April, May, and June 2019
Problem 20-4A (Continued)
Part 8
ZIGBY MANUFACTURING
Cash Budgets
April, May, and June 2019
April
May
June
Beginning cash balance ………………………………..
$ 40,000
$ 83,346
$124,295
Cash receipts from customers (note A)…………….
488,925
481,770
468,653
Total cash available ………………………………………
528,925
565,116
592,948
Cash payments for:
Raw materials (note B) …………………………………..
200,500
198,000
201,500
Direct labor …………………………………………………
Variable overhead ……………………………………….
Sales commissions …………………………………….
147,750
26,595
39,114
149,250
26,865
37,206
153,000
27,540
38,160
Sales salaries ……………………………………………..
3,000
3,000
3,000
General & administrative salaries ………………..
12,000
12,000
12,000
Dividends …………………………………………………..
10,000
95,346
124,295
23,248
$124,295
Supporting calculations
April
May
June
Total
Note A: Cash receipts from customers
Total sales …………………………..…………………….
$488,925
$465,075
$477,000
$1,431,000
Cash sales (30%) ……………………………………….
146,677
139,522
143,100
429,299
Credit sales (70%) ……………………………………..
342,248
325,553
333,900
1,001,701
Cash collections
Month after sale (100%) …………………………..
$342,248
$342,248
$325,553
$1,010,049
Cash sales…………………………………………………
146,677
139,522
143,100
429,299
Total cash received ……………………………………
$488,925
$481,770
$468,653
$1,439,348
Month after purchase (100%) ……………………..
$200,500
$198,000
$201,500
Problem 20-4A (Continued)
Part 9
ZIGBY MANUFACTURING
Budgeted Income Statement
For Three Months Ended June 30, 2019
Sales ……………………………………………………………………..
$1,431,000
Cost of goods sold (60,000 units @ $19.85) …………….
1,191,000
Gross profit …………………………………………………………..
240,000
Operating expenses
Sales commissions ……………………………………………..
$114,480
Sales salaries ………………………………………………………
9,000
General administrative salaries …………………………..
36,000
Long-term note interest ……………………………………….
13,500
Interest expense ………………………………………………….
120
173,100
Income before taxes ………………………………………………
66,900
Income taxes (35%) ……………………………………………….
23,415
Net income …………………………………………………………….
$ 43,485
Part 10
ZIGBY MANUFACTURING
Budgeted Balance Sheet
June 30, 2019
ASSETS
Cash ……………………………………………………
$ 40,000
Cash budget
Accounts receivable …………………………..
333,900
Note C
Raw materials inventory ………………………
Finished goods inventory …………………….
80,000
325,540
Note D
Note E
Total current assets …………………………..
779,440
Equipment …………………………………………..
$730,000
Note F
Less accumulated depreciation ……………
210,000
520,000
Note G
Total assets …………………………………………
$1,299,440
LIABILITIES AND EQUITY
Accounts payable ………………………………..
Note H
Bank loan payable ……………………………….
Cash budget
Taxes payable ……………………………………..
23,415
Income stmt.
Total current liabilities …………………………
222,167
Common stock …………………………………….
$335,000
Retained earnings ………………………………..
242,273
Note I
577,273
Problem 20-4A (Concluded)
Supporting Footnotes
Note C
Beginning receivables ………………………………………………
$ 342,248
Credit sales ………………………………………………………………
1,001,701
Less collections ……………………………………………………….
(1,010,049)
Ending receivables ……………………………………………………
$ 333,900
Note D
Beginning raw materials inventory …………………………..
$ 98,500
Purchases of raw materials ……………………………………….
Less materials used in production** …………………………..
(600,000)
Ending raw materials inventory* ………………………………..
$ 80,000
Note E
Beginning finished goods inventory …………………………..
$ 325,540
Cost of goods completed during the period ……………….
1,191,000
Less cost of goods sold during the period …………………
(1,191,000)
Ending finished goods inventory*…………………………..
$ 325,540
*Also equals 16,400 units @ $19.85 = $325,540
Note F
Beginning equipment ………………………………………………..
$ 600,000
Purchased in June ……………………………………………………
130,000
Total ………………………………………………………………………..
$ 730,000
Note G
Beginning accumulated depreciation …………………………
$ 150,000
Depreciation expense …………………………..…………………..
60,000
Total ………………………………………………………………………..
$ 210,000
Note H
Beginning accounts payable ……………………………………..
$ 200,500
Purchases of raw materials ……………………………………….
Payments for raw materials ……………………………………….
(600,000)
Ending accounts payable ………………………………………….
$ 182,000
Note I
ZIGBY MANUFACTURING
Budgeted Statement of Retained Earnings
For Three Months Ended June 30, 2019
Retained earnings, beginning ……………………………………… $208,788
Add: Net income …………………………………………… 43,485
252,273
Less: Dividends …………………………………………….. 10,000
Retained earnings, ending ………………………………………….. $242,273
Problem 20-5A (50 minutes)
Part 1
KEGGLER’S SUPPLY
Merchandise Purchases Budgets
For March, April, and May
March
April
May
FOOTWEAR
Budgeted sales for next month ………………………
25,000
32,000
35,000
Ratio of ending inventory to future sales ………..
30%
30%
30%
Budgeted ending inventory …………………………..
7,500
9,600
10,500
Required units of available merchandise ………..
22,500
34,600
42,500
Less actual (or budgeted) beginning inventory …….
(7,500)
(9,600)
Budgeted purchases ……………………………………..
SPORTS EQUIPMENT
Budgeted sales for next month ………………………
90,000
95,000
90,000
Ratio of ending inventory to future sales ………..
30%
30%
30%
Budgeted ending inventory …………………………..
27,000
28,500
27,000
Add budgeted sales ……………………………………….
70,000
90,000
95,000
Required units of available merchandise ………..
97,000
118,500
122,000
Less actual (or budgeted) beginning inventory …….
(80,000)
(27,000)
(28,500)
Budgeted purchases ……………………………………..
17,000
91,500
93,500
APPAREL
Budgeted sales for next month ………………………
38,000
37,000
25,000
Ratio of ending inventory to future sales ………..
30%
30%
30%
Budgeted ending inventory …………………………..
11,400
11,100
7,500
Required units of available merchandise ………..
51,400
49,100
44,500
Problem 20-6A (50 minutes)
ONEIDA COMPANY
Cash Budget
For September, October, and November
September
October
November
Beginning balance ……………………………………
$ 5,000
$ 99,250
$ 69,500
Cash receipts
Collection on accounts receivable* …………
159,250
249,250
338,100
Receipts from bank loan …………………………
100,000
_______
_______
Total cash available ………………………………….
264,250
348,500
407,600
Cash payments
Payments on accounts payable** ……………
100,000
217,000
228,000
Payroll ……………………………………………………
20,000
22,000
24,000
Rent ……………………………………………………….
10,000
10,000
10,000
Other expenses ………………………………………
35,000
30,000
20,000
Repayment on bank loan ………………………..
100,000
Interest on bank loan*** ………………………….
________
________
3,000
Total cash payments ………………………………
165,000
279,000
385,000
Ending cash balance ………………………………..
$ 99,250
$ 69,500
$ 22,600
*** Interest at 12% on $100,000 for 3 months is $3,000.