Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 20
1211
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
1,080,000
20
216,000
50
900,000
20
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 ……………
1,200
1,000
Part 3
AZTEC COMPANY
Merchandise Purchases Budgets
For May, June, and July
May
June
July
Budgeted ending inventory units (part 2) ………
1,300
1,100
860
Add budgeted sales units …………………………..
2,000
6,000
5,000
Deduct beginning inventory (units) …………….
(1,100)
1212
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
314,160
Part 5
AZTEC COMPANY
Cash Budget
June and July
June
July
Beginning cash balance …………………………………………
$100,000
$100,000
Cash receipts from customers ……………………………….
597,600
820,800
920,800
110,000
250
437
Preliminary cash balance ……………………………………….
81,350
241,003
Additional loan from bank ……………………………………..
18,650
0
Repayment of loan to bank …………………………………….
________
43,650
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 20
1213
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
March 2020 …………………………………………………..
Part 2
DIMSDALE SPORTS CO.
Merchandise Purchases Budgets
January, February, and March 2020
January
February
March
Total
Next month’s budgeted sales units …..
9,000
11,000
10,000
Ratio of inventory to future sales ………
x 20%
x 20%
x 20%
Budgeted ending inventory units ………
1,800
Add budgeted sales units …………………
Units to be purchased ………………………
Budgeted cost per unit ……………………..
$ 30
Budgeted merchandise purchases ……
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 salaries………………………………….
1214
Problem 20-8A (Continued)
Part 4
DIMSDALE SPORTS CO.
General and Administrative Expense Budgets
January, February, and March 2020
January
February
March
Total
Salaries ……………………………………………….
$12,000
$12,000
$12,000
$36,000
Depreciation* ……………………………………….
* Depreciation expense calculations
Annual
Amount
January
February
March
Total
12,000
Equipment owned
Part 5
DIMSDALE SPORTS CO.
Capital Expenditures Budgets
January, February, and March 2020
January
February
March
Equipment purchases …………………………………..
$36,000
$96,000
$ 28,800
Total ……………………………………………………….
$36,000
$96,000
1215
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 salaries ……………………………………………..
General & administrative salaries ………………..
12,000
12,000
12,000
Maintenance expense …………………………………
Taxes payable …………………………………………….
90,000
Purchases of equipment …………………………..
36,000
96,000
28,800
Purchase of land …………………………………………
________
________
150,000
Total cash payments …………………………………….
212,150
516,800
556,400
45,100
Repayment of loan to bank …………………………..
________
$210,300
$143,400
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
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
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 20
1216
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
374,450
Income before taxes ………………………………………………
300,550
Income taxes (40%) ……………………………………………….
120,220
Part 8
DIMSDALE SPORTS CO.
Budgeted Balance Sheet
March 31, 2020
ASSETS
Cash ……………………………………………………
$ 143,400
Cash budget
Accounts receivable …………………………..
602,250
Note C
60,000
Total current assets …………………………..
805,650
150,000
Capital budget
Equipment …………………………………………..
Less accumulated depreciation ……………
613,000
Note F
Note D
LIABILITIES AND EQUITY
Accounts payable ………………………………..
$ 549,600
Note G
Bank loan payable ……………………………….
0
Cash budget
Taxes payable (due 4/15/2020) ……………..
120,220
Income stmt.
Total liabilities ……………………………………..
669,820
Common stock …………………………………….
Unchanged
Retained earnings ………………………………..
898,830
1217
Problem 20-8A (Concluded)
Supporting Footnotes
Note C
Beginning receivables ………………………………………………
$ 525,000
Credit sales ………………………………………………………………
1,113,750
Less collections ……………………………………………………….
Note D
Beginning inventory ………………………………………………….
$ 150,000
Purchases ………………………………………………………………..
Less cost of goods sold ……………………………………………
(810,000)
Ending inventory* ……………………………………………………..
$ 60,000
*Also equals 2,000 units @ $30 = $60,000
Note E
Beginning equipment ………………………………………………..
$ 540,000
Purchased in January ……………………………………………….
36,000
Purchased in February………………………………………………
96,000
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 ………………………………………………………………..
Payments …………………………..…………………………………….
(530,400)
Ending accounts payable ………………………………………….
$ 549,600
Note H
Beginning retained earnings ……………………………………..
$ 246,000
Net income …………………………..…………………………………..
180,330
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 20
1218
PROBLEM SET B
Problem 20-1B (30 minutes)
Part 1
NSA COMPANY
Production Budget (in units)
Second Quarter
Budgeted ending inventory (units) ……………………………………………….
6,000
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
741,000
Direct materials cost per pound ………………………………………………..
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 20
1219
Problem 20-1B (concluded)
Part 3
NSA COMPANY
Direct Labor Budget
Second Quarter
Units to be produced ………………………………………………………
248,000
Direct labor rate (per hour) ……………………………………………..
Part 4
NSA COMPANY
Factory Overhead Budget
Second Quarter
Total labor hours needed ………………………………………………..
124,000
Variable overhead rate per direct labor hour ……………………
x $12
Budgeted fixed overhead ………………………………………………..
1220
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 sales (20% of sales) ……………………..
16,120
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 20
1221
Problem 20-2B (continued)
(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
10,140
Direct labor ……………………………………………
10,400
Sales commissions (10% of sales) …………
Interest on bank loan
July ($2,600 x 1%)* ………………………………
August ($2,286 x 1%)** ………………………..
Preliminary cash balance ………………………
26
_______
$12,914
23
$26,657
_______
$48,211
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 20
1222
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
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
September …………………………..
13,310
Part 2: Analysis Component
The plan for increasing sales volume by reducing the price and increasing
advertising would cause the company to generate less net income in each of the
three months of the next quarter than was earned in June. The expected results
1223
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
19,000
20,000
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
Ratio of inventory to future sales ………
x 70%
x 70%
x 70%
Add budgeted sales ………………………….
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 ……….
Add budgeted ending inventory ………..
Total materials requirements (units) ….
Deduct beginning inventory ……………..
Materials to be purchased ………………..
Material price per unit ………………………
Budgeted raw material purchases …….
Part 4
NABAR MANUFACTURING
Direct Labor Budget
July, August, and September 2019
July
August
Sept.
Total
Budgeted production (units) …………….
17,500
19,700
22,800
Labor requirements per unit (hours) ….
x 0.50
x 0.50
x 0.50
Total labor hours needed ………………….
Direct labor rate (per hour) ……………….
Budgeted direct labor cost ……………….
Part 5
NABAR MANUFACTURING
Factory Overhead Budget
July, August, and September 2019
July
August
Sept.
Total
Budgeted production (units) ……………
17,500
19,700
22,800
Variable factory overhead rate* ……….
x $1.35
x $1.35
x $1.35
Budgeted variable overhead ……………
23,625
26,595
30,780
Budgeted fixed overhead ………………..
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 20
1225
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
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
1226
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
General & administrative salaries ………………..
Direct labor …………………………………………………
140,000
157,600
182,400
Loan interest ($24,000 x 1%) …………………………..
240
Long-term note interest ($300,000 x .0.9%) …………
Purchase of equipment ……………………………….
2,700
_______
2,700
_______
2,700
100,000
Total cash payments …………………………………….
276,165
302,455
443,660
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
102,000
306,000
Total cash received ……………………………………
$346,800
$328,100
$1,031,900
Month after purchase (100%) ……………………..
$ 51,400
$ 50,760
$ 81,280
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 20
1227
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
Income before taxes ………………………………………………
Part 10
NABAR MANUFACTURING
Budgeted Balance Sheet
September 30, 2019
ASSETS
Cash ……………………………………………………
$ 40,000
Cash budget
Accounts receivable …………………………..
238,000
Note C
Total current assets …………………………..
534,920
Equipment …………………………………………..
Note F
Less accumulated depreciation ……………
Raw materials inventory ………………………
15,840
Note D
LIABILITIES AND EQUITY
Accounts payable ………………………………..
$ 88,800
Note H
Bank loan payable ……………………………….
14,380
Cash budget
Taxes payable ……………………………………..
Income stmt.
Total current liabilities …………………………
107,086
Common stock …………………………………….
Retained earnings ………………………………..
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 20
1228
Problem 20-4B (Concluded)
Supporting Footnotes
Note C
Beginning receivables ………………………………………………
$ 249,900
Credit sales ………………………………………………………………
714,000
Less collections ……………………………………………………….
(725,900)
Ending receivables ……………………………………………………
Note D
Beginning raw materials inventory …………………………..
Purchases of raw materials ……………………………………….
220,840
Less materials used in production** …………………………..
(240,000)
Ending inventory raw materials inventory* …………………
$ 15,840
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 …………………………………………..
Total …………………………..……………………………………………
$ 820,000
Note G
Beginning accumulated depreciation …………………………
Depreciation expense ……………………………………………….
60,000
Total …………………………..……………………………………………
$ 300,000
Note H
Beginning accounts payable ……………………………………..
Purchases of raw materials ……………………………………….
220,840
Payments for raw materials ……………………………………….
Ending accounts payable ………………………………………….
$ 88,800
Note I
NABAR MANUFACTURING
Budgeted Statement of Retained Earnings
For Three Months Ended September 30, 2019
Retained earnings, beginning ……………………………………… $60,580
Add: Net income …………………………………………… 7,254
67,834