Problem 20-7A (60 minutes)
Part 1
Cash collections of credit sales (accounts receivable)
From sales in
Total
% Collected
June
July
April ……………………………………….
$ 720,000
28%
$201,600
May ………………………………………..
360,000
50
180,000
………………………………………..
28
$100,800
June ……………………………………….
1,080,000
20
216,000
……………………………………….
50
540,000
July ………………………………………..
900,000
20
_______
180,000
Total collected ………………………..
$597,600
$820,800
Part 2
Budgeted ending inventories (in units)
May
June
July
Next month’s budgeted sales units ………..
6,000
5,000
3,800
Ratio of inventory to future sales ……………
20%
20%
20%
Budgeted “base” ending inventory ………..
1,200
1,000
760
Plus safety stock (units) ………………………..
100
100
100
Budgeted ending inventory (units) …………
1,300
1,100
860
Part 3
AZTEC COMPANY
Merchandise Purchases Budgets
For May, June, and July
Problem 20-7A (Continued)
Part 4
Cash payments on product purchases (for June and July)
From purchases in
Total
% Paid
June
July
May …………………………………………
$308,000
40%
$123,200
June ………………………………………..
638,000
60
382,800
……………………………………….
40
$255,200
July …………………………………………
523,600
60
________
314,160
Total paid ………………………………..
$506,000
$569,360
Part 5
AZTEC COMPANY
Cash Budget
June and July
June
July
Cash receipts from customers ……………………………….
920,800
110,000
Preliminary cash balance ……………………………………….
81,350
241,003
Additional loan from bank ……………………………………..
18,650
0
Repayment of loan to bank …………………………………….
________
43,650
Ending cash balance ……………………………………………..
$100,000
$197,353
Ending loan balance** ……………………………………………
$ 43,650
$ 0
Problem 20-8A (130 minutes)
Part 1
DIMSDALE SPORTS CO.
Sales Budgets
January, February, and March 2020
Budgeted
Units
Budgeted
Unit Price
Budgeted
Total Dollars
January 2020 ………………………………………………..
7,000
$55
$ 385,000
February 2020……………………………………………….
9,000
55
495,000
March 2020 …………………………………………………..
11,000
55
605,000
Total for the first quarter ……………………………….
27,000
$1,485,000
Part 2
DIMSDALE SPORTS CO.
Merchandise Purchases Budgets
January, February, and March 2020
January
February
March
Total
x 20%
9,000
11,000
$ 30
Part 3
DIMSDALE SPORTS CO.
Selling Expense Budgets
January, February, and March 2020
January
February
March
Total
Budgeted sales …………………………..
$385,000
$495,000
$605,000
Sales commission percent ………………
x 20%
x 20%
x 20%
Sales commissions expense ……………
77,000
99,000
121,000
$297,000
Sales salaries………………………………….
5,000
5,000
5,000
15,000
Total budgeted selling expenses ……..
$ 82,000
$104,000
$126,000
$312,000
Problem 20-8A (Continued)
Part 4
DIMSDALE SPORTS CO.
General and Administrative Expense Budgets
January, February, and March 2020
January
February
March
Total
* Depreciation expense calculations
Annual
Amount
January
February
March
Total
Equipment owned
on 12/31/2019 ………………..
$67,500
$5,625
$5,625
$5,625
$16,875
Purchased in January ……..
4,500
375
375
375
1,125
Purchased in February …….
12,000
1,000
1,000
2,000
Purchased in March …………
3,600
______
______
300
300
Totals ……………………………..
$6,000
$7,000
$7,300
$20,300
Part 5
DIMSDALE SPORTS CO.
Capital Expenditures Budgets
January, February, and March 2020
January
Problem 20-8A (Continued)
Part 6
DIMSDALE SPORTS CO.
Cash Budgets
January, February, and March 2020
January
February
March
Beginning cash balance ………………………………..
$ 36,000
$ 30,100
$210,300
Cash receipts from customers (note A)…………….
221,250
697,000
489,500
Total cash available ………………………………………
257,250
727,100
699,800
302,800
147,600
Sales commissions …………………………………….
77,000
121,000
Sales salaries ……………………………………………..
General & administrative salaries ………………..
12,000
Maintenance expense …………………………………
Taxes payable …………………………………………….
Purchases of equipment …………………………..
36,000
Purchase of land …………………………………………
________
________
150,000
Total cash payments …………………………………….
212,150
516,800
556,400
Preliminary cash balance …………………………..
45,100
210,300
143,400
Repayment of loan to bank …………………………..
(15,000)
_______
________
Ending cash balance …………………………………….
$ 30,100
$210,300
$143,400
Loan balance, end of month ………………………….
$ 0
$ 0
$ 0
Supporting calculations
January
February
March
Total
Note A: Cash receipts from customers
Total sales …………………………………………………
$385,000
$495,000
$605,000
$1,485,000
Cash sales (25%) ……………………………………….
96,250
123,750
151,250
371,250
Credit sales (75%) ……………………………………..
288,750
371,250
453,750
1,113,750
Cash collections
Receivables at 12/31/2019 ………………………….
$125,000
$400,000
$525,000
Month after sale (60%) …………………………..
173,250
$222,750
396,000
Second month (40%) ………………………………….
_______
_______
115,500
Total from credit customers ……………………….
125,000
573,250
338,250
Cash sales…………………………………………………
96,250
123,750
151,250
371,250
Credit purchases ……………………………………….
$114,000
$282,000
$324,000
$720,000
Month after purchase (20%) ……………………….
$ 56,400
Second month (80%) ………………………………….
_______
_______
91,200
Total paid on purchases …………………………..
$ 80,000
$302,800
$147,600
$530,400
Problem 20-8A (Continued)
Part 7
DIMSDALE SPORTS CO.
Budgeted Income Statement
For Three Months Ended March 31, 2020
Sales ……………………………………………………………………..
$1,485,000
Cost of goods sold (27,000 units @ $30) …………………
810,000
Gross profit …………………………………………………………..
675,000
Operating expenses
Sales commissions ……………………………………………..
$297,000
Sales salaries ………………………………………………………
15,000
General administrative salaries …………………………..
36,000
Maintenance expense ………………………………………….
6,000
Depreciation expense ………………………………………….
20,300
Interest expense ………………………………………………….
150
374,450
Income before taxes ………………………………………………
300,550
Income taxes (40%) ……………………………………………….
120,220
Net income …………………………………………………………….
$180,330
Part 8
DIMSDALE SPORTS CO.
Budgeted Balance Sheet
March 31, 2020
ASSETS
Cash ……………………………………………………
$ 143,400
Cash budget
Accounts receivable …………………………..
602,250
Note C
Inventory ……………………………………………..
60,000
Note D
Total current assets …………………………..
805,650
150,000
Capital budget
Equipment …………………………………………..
$700,800
Less accumulated depreciation ……………
613,000
Note F
LIABILITIES AND EQUITY
Accounts payable ………………………………..
Note G
Bank loan payable ……………………………….
Cash budget
Taxes payable (due 4/15/2020) ……………..
120,220
Income stmt.
Total liabilities ……………………………………..
669,820
Common stock …………………………………….
$472,500
Unchanged
Retained earnings ………………………………..
Total stockholders’ equity ……………………
898,830
Total liabilities and equity …………………….
$1,568,650
Problem 20-8A (Concluded)
Supporting Footnotes
Note C
Beginning receivables ………………………………………………
$ 525,000
Credit sales ………………………………………………………………
1,113,750
Less collections ……………………………………………………….
(1,036,500)
Ending receivables ……………………………………………………
$ 602,250
Note D
Beginning inventory ………………………………………………….
$ 150,000
Purchases ………………………………………………………………..
Less cost of goods sold ……………………………………………
(810,000)
*Also equals 2,000 units @ $30 = $60,000
Note E
Beginning equipment ………………………………………………..
$ 540,000
Purchased in January ……………………………………………….
Purchased in February………………………………………………
Purchased in March ………………………………………………….
28,800
Total …………………………..……………………………………………
$ 700,800
Note F
Beginning accumulated depreciation …………………………
$ 67,500
Depreciation expense ……………………………………………….
20,300
Total …………………………..……………………………………………
$ 87,800
Note G
Beginning accounts payable ……………………………………..
$ 360,000
Purchases ………………………………………………………………..
720,000
Payments …………………………..…………………………………….
(530,400)
Ending accounts payable ………………………………………….
$ 549,600
Note H
Beginning retained earnings ……………………………………..
$ 246,000
Net income …………………………..…………………………………..
180,330
Total …………………………..……………………………………………
$ 426,330
PROBLEM SET B
Problem 20-1B (30 minutes)
Part 1
NSA COMPANY
Production Budget (in units)
Second Quarter
Part 2
NSA COMPANY
Direct Materials Budget (in lbs, except where noted)
Second Quarter
Materials (aluminum) needed for production (248,000 x 3 lbs.) …..
744,000
Add budgeted ending inventory (lbs. of aluminum) ……………………
12,000
Total materials (lbs. of aluminum) requirements………………………..
756,000
Deduct beginning inventory (lbs. of aluminum) …………………………
(15,000)
Lbs. of direct materials (aluminum) to be purchased …………………
741,000
Direct materials cost per pound ………………………………………………..
$4
Budgeted cost of direct materials purchases (741,000 x $4) ………
$2,964,000
Problem 20-1B (concluded)
Part 3
NSA COMPANY
Direct Labor Budget
Second Quarter
Units to be produced ………………………………………………………
248,000
Labor requirements per unit (hours) …………………………..
x 0.50
Total labor hours needed ………………………………………………..
124,000
Direct labor rate (per hour) ……………………………………………..
x $18
Budgeted direct labor cost ……………………………………………..
$2,232,000
Part 4
NSA COMPANY
Factory Overhead Budget
Second Quarter
Budgeted variable overhead ……………………………………………
Problem 20-2B (30 minutes)
(1)
A1 MANUFACTURING
Cash Receipts Budget
For July, August, and September
July
August
Sept.
Sales ……………………………………………………..
$63,400
$80,600
$48,600
Less ending accts. receivable (80%) ………
50,720
64,480
38,880
Cash receipts from
Cash sales (20% of sales) ……………………..
16,120
(2)
A1 MANUFACTURING
Cash Budget
For July, August, and September
July
August
Sept.
Beginning cash balance* ……………………….
$12,900
$12,600
$24,371
Cash receipts (from part 1) …………………….
59,680
66,840
74,200
Total cash available ………………………………
72,580
79,440
98,571
Cash payments for:
Direct materials ……………………………………..
12,480
9,900
10,140
Direct labor ……………………………………………
10,400
8,250
8,450
Overhead ………………………………………………
18,720
14,850
15,210
Sales commissions (10% of sales) …………
6,340
8,060
4,860
Office salaries ……………………………………….
Rent ………………………………………………………
Interest on bank loan
Repayment of loan to bank …………………….
314
4,600
7,100
4,600
7,100
4,600
7,100
Problem 20-3B (50 minutes)
Part 1
HCS MFG.
Budgeted Income Statement
For Months of July, August, and September, 2019
July
August
September
Sales* …………………………………………………
$1,265,000
$1,391,500
$1,530,650
Cost of goods sold* …………………………..
660,000
726,000
798,600
Gross profit ………………………………………..
605,000
665,500
732,050
Expenses
Sales commissions (10%) ………………….
126,500
139,150
153,065
Advertising ($200,000 x 1.25) …………….
250,000
250,000
250,000
Store rent ………………………………………….
24,000
24,000
24,000
40,000
40,000
40,000
Total expenses ……………………………………
* Volume for the next three months increases by 10% per month
Sales
Cost of Goods
Units
(@ $115)
Sold (@ $60)
June ($1,300,000/$130) …………………………
10,000
July …………………………………………………….
11,000
$1,265,000
$660,000
August ………………………………………………..
12,100
1,391,500
726,000
September …………………………..
13,310
1,530,650
798,600
Part 2: Analysis Component
Problem 20-4B (130 minutes)
Part 1
NABAR MANUFACTURING
Sales Budgets
July, August, and September 2019
Budgeted
Units
Budgeted
Unit Price
Budgeted
Sales Dollars
July 2019 ………………………………………………………
21,000
$17.00
$ 357,000
August 2019 …………………………..……………………..
19,000
17.00
323,000
September 2019 ……………………………………………
20,000
17.00
340,000
Total for the first quarter ……………………………….
60,000
$1,020,000
Part 2
NABAR MANUFACTURING
Production Budget
July, August, and September 2019
July
August
Sept.
Total
Next month’s budgeted sales ……………
19,000
20,000
24,000
Problem 20-4B (continued)
Part 3
NABAR MANUFACTURING
Raw Materials Budget
July, August, and September 2019
July
August
Sept.
Total
Production budget (units) …………………
17,500
19,700
22,800
Materials requirement per unit ………….
x 0.50
x 0.50
x 0.50
Materials needed for production ……….
8,750
9,850
11,400
Add budgeted ending inventory ………..
1,970
2,280
1,980
Total materials requirements (units) ….
10,720
12,130
13,380
Deduct beginning inventory ……………..
(4,375)
(1,970)
(2,280)
Materials to be purchased ………………..
6,345
10,160
11,100
27,605
Material price per unit ………………………
$ 8
$ 8
$ 8
$ 8
Budgeted raw material purchases …….
$ 50,760
$ 81,280
$ 88,800
$220,840
Part 4
NABAR MANUFACTURING
Direct Labor Budget
July, August, and September 2019
July
August
Sept.
Total
Total labor hours needed ………………….
Direct labor rate (per hour) ……………….
$ 16
$ 16
Budgeted direct labor cost ……………….
$157,600
$480,000
Part 5
NABAR MANUFACTURING
Factory Overhead Budget
July, August, and September 2019
July
August
Sept.
Total
Problem 20-4B (continued)
Part 6
NABAR MANUFACTURING
Selling Expense Budgets
July, August, and September 2019
July
August
Sept.
Total
Budgeted sales …………………………..
$357,000
$323,000
$340,000
Sales commission percent ………………
x 10%
x 10%
x 10%
Sales salaries………………………………….
Part 7
NABAR MANUFACTURING
General and Administrative Expense Budgets
July, August, and September 2019
July
August
Sept.
Total
Salaries ……………………………………………….
$ 9,000
$ 9,000
$ 9,000
$27,000
Interest on long-term note ……………………
2,700
2,700
2,700
8,100
Total budgeted G&A expenses ……………..
$11,700
$11,700
$11,700
$35,100
Problem 20-4B (Continued)
Part 8
NABAR MANUFACTURING
Cash Budgets
July, August, and September 2019
July
August
Sept.
Beginning cash balance ………………………………..
$ 40,000
$ 96,835
$141,180
Cash receipts from customers (note A)…………….
357,000
346,800
328,100
Total cash available ………………………………………
397,000
443,635
469,280
Cash payments for:
Raw materials (note B) …………………………………..
51,400
50,760
81,280
Direct labor …………………………………………………
Variable overhead ……………………………………….
Sales commissions …………………………………….
140,000
23,625
35,700
157,600
26,595
32,300
182,400
30,780
34,000
Sales salaries ……………………………………………..
3,500
3,500
3,500
General & administrative salaries ………………..
9,000
9,000
9,000
Income taxes …………………………..………………….
Dividends …………………………………………………..
10,000
20,000
25,620
$141,180
Supporting calculations
July
August
Sept.
Total
Note A: Cash receipts from customers
Total sales …………………………………………………
$357,000
$323,000
$340,000
$1,020,000
Cash sales (30%) ……………………………………….
107,100
96,900
102,000
306,000
Credit sales (70%) ……………………………………..
249,900
226,100
238,000
714,000
Cash collections
Month after sale (100%) …………………………..
$249,900
$249,900
$226,100
$ 725,900
Cash sales…………………………………………………
107,100
96,900
102,000
306,000
Total cash received ……………………………………
$357,000
$346,800
$328,100
$1,031,900
Month after purchase (100%) ……………………..
$ 51,400
$ 50,760
$ 81,280
Problem 20-4B (Continued)
Part 9
NABAR MANUFACTURING
Budgeted Income Statement
For Three Months Ended September 30, 2019
Sales ……………………………………………………………………..
$1,020,000
Cost of goods sold (60,000 units @ $14.35) …………….
861,000
Gross profit …………………………………………………………..
159,000
Operating expenses
Sales commissions ……………………………………………..
$102,000
Sales salaries ………………………………………………………
10,500
General administrative salaries …………………………..
27,000
Long-term note interest ……………………………………….
8,100
Interest expense ………………………………………………….
240
147,840
Income before taxes ………………………………………………
11,160
Income taxes (35%) ……………………………………………….
3,906
Net income …………………………..………………………………..
$ 7,254
Part 10
NABAR MANUFACTURING
Budgeted Balance Sheet
September 30, 2019
ASSETS
Cash ……………………………………………………
$ 40,000
Cash budget
Accounts receivable …………………………..
238,000
Note C
Raw materials inventory ………………………
Finished goods inventory …………………….
15,840
241,080
Note D
Note E
Total current assets …………………………..
534,920
Equipment …………………………………………..
$820,000
Note F
Less accumulated depreciation ……………
LIABILITIES AND EQUITY
Accounts payable ………………………………..
Note H
Bank loan payable ……………………………….
Cash budget
Taxes payable ……………………………………..
Income stmt.
Total current liabilities …………………………
107,086
Common stock …………………………………….
$600,000
Retained earnings ………………………………..
Problem 20-4B (Concluded)
Supporting Footnotes
Note C
Beginning receivables ………………………………………………
$ 249,900
Credit sales ………………………………………………………………
714,000
Less collections ……………………………………………………….
(725,900)
Ending receivables ……………………………………………………
$ 238,000
Note D
Beginning raw materials inventory …………………………..
$ 35,000
Purchases of raw materials ……………………………………….
220,840
Less materials used in production** …………………………..
(240,000)
Ending inventory raw materials inventory* …………………
$ 15,840
*Also equals 1,980 units @ $8 = $15,840
**30,000 units x $8 per unit
Note E
Beginning finished goods inventory …………………………..
$ 241,080
Cost of goods completed during the period ……………….
861,000
Less cost of goods sold during the period …………………
(861,000)
Ending inventory raw materials inventory* …………………
$ 241,080
*Also equals 16,800 units @ $14.35 = $241,080
Note F
Beginning equipment ………………………………………………..
$ 720,000
Purchased in September …………………………………………..
100,000
Total …………………………..……………………………………………
$ 820,000
Note G
Beginning accumulated depreciation …………………………
$ 240,000
Depreciation expense ……………………………………………….
60,000
Total …………………………..……………………………………………
$ 300,000
Note H
Beginning accounts payable ……………………………………..
$ 51,400
Purchases of raw materials ……………………………………….
220,840
Payments for raw materials ……………………………………….
(183,440)
Ending accounts payable ………………………………………….
$ 88,800
Note I
NABAR MANUFACTURING
Budgeted Statement of Retained Earnings
For Three Months Ended September 30, 2019