Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 22
1282
Problem 22-4B (Concluded)
Supporting Footnotes
Note C
Note D
Beginning raw materials inventory …………………………..
Purchases of raw materials ……………………………………….
Less materials used in production** …………………………..
(240,000)
Note E
Beginning finished goods inventory …………………………..
$ 241,080
Cost of goods completed during the period ……………….
Less cost of goods sold during the period …………………
*Also equals 16,800 units @ $14.35 = $241,080
Note F
Beginning equipment …………………………..……………………
$ 720,000
Purchased in September …………………………………………..
Note G
Beginning accumulated depreciation …………………………
Depreciation expense ……………………………………………….
60,000
Note H
Beginning accounts payable ……………………………………..
$ 51,400
Purchases of raw materials ……………………………………….
Payments for raw materials ……………………………………….
Note I
NABAR MANUFACTURING
Budgeted Statement of Retained Earnings
For Three Months Ended September 30, 2017
Retained earnings, beginning ……………………. $60,580
Beginning receivables ………………………………………………
Credit sales ………………………………………………………………
Less collections ……………………………………………………….
1283
Problem 22-5B (60 minutes)
Part 1
H2O SPORTS
Merchandise Purchases Budgets
For April, May, and June
April
May
Budgeted sales for next month ………………………
Ratio of ending inventory to future sales ………..
Budgeted ending inventory …………………………..
Required units of available merchandise ………..
79,000
103,000
140,000
Less actual (or budgeted) beginning inventory …….
(40,000)
(9,000)
(13,000)
Budgeted purchases ……………………………………..
Budgeted sales for next month ………………………
Ratio of ending inventory to future sales ………..
Add budgeted sales ……………………………………….
110,000
Required units of available merchandise ………..
101,000
120,000
Less actual (or budgeted) beginning inventory …….
(9,000)
(11,000)
Budgeted purchases ……………………………………..
LIFE JACKETS
Budgeted sales for next month ………………………
190,000
200,000
120,000
Ratio of ending inventory to future sales ………..
10%
10%
10%
Budgeted ending inventory …………………………..
19,000
20,000
12,000
160,000
190,000
200,000
Required units of available merchandise ………..
179,000
210,000
212,000
Less actual (or budgeted) beginning inventory …….
1284
Problem 22-5B (Concluded)
Part 2. Analysis Component
Inventory levels might become too high for a number of reasons, including:
• Management may have simply lost sight of inventory levels, thereby
allowing them to reach inappropriately high levels.
1285
Problem 22-6B (50 minutes)
SONY STEREO
Cash Budgets
For April, May, and June
April
May
June
Beginning balance ……………………………………
$ 3,000
$ 53,000
$ 44,000
Cash receipts
Receipts from bank loan …………………………
Total cash available ………………………………….
Cash payments
Payments on accounts payable** ……………
80,000
188,000
186,000
Payroll ……………………………………………………
16,000
17,000
18,000
Other expenses ………………………………………
64,000
Interest on bank loan* …………………………..
Supporting calculations
Collections of credit sales*
March
April
May
June
March sales ($180,000)—[25%: 45%: 20%: 9%] …………..
$ 45,000
$ 81,000
$ 36,000
$ 16,200
April sales ($220,000)—[25%: 45%: 20%] …………………..
May sales ($300,000)—[25%: 45%] …………………………..
June sales ($380,000)—[25%] …………………………..
–
–
Payments on credit purchases**
March
April
May
June
March purchases ($100,000)—(0%: 80%: 20%) …………………………..
April purchases ($210,000)—(0%: 80%: 20%) …………………………..
May purchases ($180,000)—(0%: 80%) …………………………..
June purchases ($220,000)—(0%) …………………………..
–
–
1286
Problem 22-7B (70 minutes)
Part 1
Cash collections of credit sales (accounts receivable)
From sales in
Total
% Collected
March
April
January …………………………..…..
$396,000
23%
$ 91,080
February ………………………………
173,250
March ………………………………….
167,200
Part 2
Budgeted ending inventories (in units)
January
March
April
Next month’s budgeted sales units ………..
22,500
18,750
21,000
Budgeted “base” ending inventory ………..
Part 3
CONNICK COMPANY
Merchandise Purchases Budgets
For February, March, and April
February
March
Budgeted ending inventory units (part 2) ………
3,900
3,850
Required units of available merchandise …….
Budgeted cost per unit ……………………………….
1287
Problem 22-7B (Continued)
Part 4
Cash payments on product purchases (for March and April)
From purchases in
Total
% Paid
March
April
February …………………………………
$261,600
70%
$183,120
March …………………………………….
30
70
30
Part 5
CONNICK COMPANY
Cash Budget
March and April
March
April
Beginning cash balance ………………………………………………….
$ 50,000
$ 58,070
Cash payments for:
Additional loan ……………………………………………………….
$ 58,070
$ 94,920
Part 6
Analysis Component: Information about the supply of cash in the near future
would be helpful to the management of Connick Company. A good cash
1288
Problem 22-8B (130 minutes)
Part 1
ISLE CORPORATION
Sales Budgets
January, February, and March 2018
Budgeted
Unit Price
Budgeted
Total Dollars
January 2018 ……………………………………………….
6,000
$45
$ 270,000
February 2018………………………………………………
8,000
March 2018 ………………………………………………….
Part 2
ISLE CORPORATION
Merchandise Purchases Budgets
January, February, and March 2018
January
February
March
Total
Next month’s budgeted sales units …..
8,000
9,000
Ratio of inventory to future sales ………
x 25%
x 25%
Budgeted ending inventory units ………
2,000
2,250
Deduct beginning inventory units ……..
(5,000)
Units to be purchased ………………………
Budgeted cost per unit ……………………..
Part 3
ISLE CORPORATION
Selling Expense Budgets
January, February, and March 2018
January
February
March
Budgeted sales …………………………..
$270,000
$360,000
$450,000
Sales commission percent ………………
Sales commissions expense ……………
Sales salaries………………………………….
1289
Problem 22-8B (Continued)
Part 4
ISLE CORPORATION
General and Administrative Expense Budgets
January, February, and March 2018
January
March
Salaries …………………………..…………………..
$12,000
$12,000
Depreciation* ……………………………………….
* Depreciation expense calculations
Annual
Amount
January
March
Equipment owned
on 12/31/2017 ………………..
$67,500
$5,625
$5,625
12,000
Part 5
ISLE CORPORATION
Capital Expenditures Budgets
January, February, and March 2018
February
March
Equipment purchases …………………………………..
$96,000
$ 28,800
1290
Problem 22-8B (Continued)
Part 6
ISLE CORPORATION
Cash Budgets
January, February, and March 2018
January
February
March
Beginning cash balance ………………………………..
$ 36,000
$182,850
$ 107,850
Cash receipts from customers (note A)…………….
382,500
421,500
355,500
Total cash available ………………………………………
418,500
604,350
463,350
Cash payments for:
306,000
123,000
Sales salaries …………………………..…………………
General & administrative salaries ………………..
12,000
12,000
12,000
Maintenance expense …………………………………
Taxes payable …………………………………………….
90,000
Purchases of equipment …………………………..
72,000
96,000
28,800
Purchase of land …………………………………………
76,950
Supporting calculations
January
February
March
Total
Note A: Cash receipts from customers
Total sales …………………………………………………
$270,000
$360,000
$450,000
$1,080,000
Cash sales (25%) ……………………………………….
$ 67,500
$ 90,000
$112,500
$ 270,000
Credit sales (75%) ……………………………………..
$202,500
$270,000
$337,500
$ 810,000
Cash collections
Receivables at 12/31/2017 (60%; 40%) ………..
$315,000
$210,000
$ 525,000
January credit sales (60%; 40%) ………………..
$ 81,000
Total from credit customers ……………………….
$315,000
Cash sales…………………………………………………
270,000
Total cash received ……………………………………
$382,500
$421,500
$355,500
$1,159,500
Credit purchases ……………………………………….
$255,000
$292,500
$637,500
Accounts payable at 12/31/2017 (20%; 80%) .
$288,000
$360,000
January purchases (20%; 80%) ………………….
1291
Problem 22-8B (Continued)
Part 7
ISLE CORPORATION
Budgeted Income Statement
For Three Months Ended March 31, 2018
Sales ……………………………………………………………………..
$1,080,000
Cost of goods sold (24,000 units @ $30) …………………
720,000
Gross profit …………………………………………………………..
360,000
$216,000
305,075
Income before taxes ………………………………………………
21,970
Part 8
ISLE CORPORATION
Budgeted Balance Sheet
March 31, 2018
ASSETS
Cash …………………………..……………………….
$ 36,000
Cash budget
Accounts receivable …………………………..
445,500
Note C
Note D
Total current assets …………………………..
549,000
Equipment …………………………………………..
$736,800
Note E
Less accumulated depreciation ……………
88,925
647,875
Note F
Capital budget
Total assets …………………………..…………….
$1,346,875
LIABILITIES AND EQUITY
Bank loan payable ……………………………….
Cash budget
Taxes payable (due 4/15/2018) ……………..
Income stmt.
Total liabilities ……………………………………..
595,420
Common stock …………………………………….
$472,500
Unchanged
Retained earnings ………………………………..
278,955
Note H
Total stockholders’ equity ……………………
1292
Problem 22-8B (Concluded)
Supporting Footnotes
Note C
Beginning receivables ……………………………………………………….
$ 525,000
Credit sales ………………………………………………………………………..
Less collections …………………………………………………………………
Note D
Beginning inventory ……………………………………………………….
$ 150,000
Purchases ………………………………………………………………………….
Less cost of goods sold ……………………………………………………..
*Also equals 2,250 units @ $30 = $67,500
Note E
Beginning equipment …………………………..…………………………..
$ 540,000
Purchased in January ……………………………………………………….
72,000
Purchased in February……………………………………………………….
Purchased in March ……………………………………………………….
28,800
Note F
Beginning accumulated depreciation …………………………..………
$ 67,500
Depreciation expense ……………………………………………………….
21,425
Note G
Beginning accounts payable ……………………………………………….
Purchases ………………………………………………………………………….
Payments …………………………………………………………………………..
Note H
Beginning retained earnings ……………………………………………….
Net income …………………………………………………………………………
32,955
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 22
1293
Serial Problem — SP 22
Serial Problem, Business Solutions (50 minutes)
Part 1
BUSINESS SOLUTIONS—Computer Furniture Segment
Budgeted Income Statements
For Months of April, May, and June
April
May
June
Sales* …………………………………………………
$69,600
$75,550
$81,500
*Results from per month volume increases for the next 3 months
Desks
Units
Sales (@ $1,150)
Variable Cost of Sales (@ $750)
April …………………………..
48
$55,200
$36,000
52
June …………………………..
56
Chairs
Units
Variable Cost of Sales (@ $250)
April …………………………..
32
$14,400
35
June …………………………..
38
April …………………………..
June …………………………..
April …………………………..
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 22
1294
Serial Problem, Business Solutions (Concluded)
Part 2
The plan for increasing sales volume by reducing the price and increasing
advertising would cause the company to generate a loss in the first month
Reporting in Action — BTN 22-1
1. Apple’s statement of cash flows would report cash paid for acquisitions
2. a. Cash paid for acquisitions of property, plant and equipment and
reported on the statement of cash flows for the year ended
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 22
1295
Comparative Analysis — BTN 22-2
1. 1. Apple and Google figures for the most recent 3 years—data available
from Appendix A—are shown below ($ millions):
Apple
Two Years
Prior
One Year
Prior
Current
Year
One
Year
Ahead
Two
Years
Ahead
Google
Two Years
Prior
One Year
Prior
Current
Year
One
Year
Ahead
Two
Years
Ahead
Sales
$55,519
$66,001
$74,989
_______
_______
2. Predictions will vary among students. Based on these three years,
Apple’s SGA/Sales ratio averages 6.35%, while Google’s averages
Sales
_______
_______
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 22
1296
Ethics Challenge — BTN 22-3
Report on “Use It or Lose It” Budgeting
Instructor note: There is no widely accepted solution to this problem. The key is for the student to
think about the problem and work to at least modify the negative behavioral consequences of this
practice.
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 22
Communicating in Practice — BTN 22-4
MEMORANDUM
TO: ____________________
FROM: ____________________
DATE: ____________________
SUBJECT: ____________________
The content of this memorandum will vary among students. The student
Taking It to the Net — BTN 22-5
1. The “e–budgets” Website lists a number of benefits such as accuracy, timeliness, ease of
sharing information, ease of updating, real-time comparison of actual performance vs.
estimates, and so on.
2. As a senior manager, my biggest concern would be security, particularly
when the system is easily accessible and usable. It would be important
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 22
1298
Teamwork in Action — BTN 22-6
There is no specific solution to this assignment. The instructor should
watch for proper development and identification of all reasonable costs.
Entrepreneurial Decision — BTN 22-7
1. Budgeting allows an organization to plan its activities better by
2. To expand their operations, Marilyn and Michelle will need financing.
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 22
1299
Hitting the Road — BTN 22-8
Instructor note: This problem is designed to (1) show that external factors are important
1. & 2.
The types of external factors identified by the student for consideration in
part (1), or selected as an explanatory factor for part (2), might include the
following:
• Location, such as near a convenient or busy traffic area.
Global Decision — BTN 22-9
1. The selling and administrative expenses budget is likely to be an
important budget in the master budgeting process at Samsung. In 2015,
2. General office expenses
3. The initial responsibility usually rests with a vice president or an