P22-48B, cont.
Requirement 5
HANEY BATTING COMPANY
Selling and Administrative Expense Budget
For the Quarter Ended March 31, 2017
Salaries Expense
$ 14,000
Rent Expense
Insurance Expense
Depreciation Expense
Supplies Expense (1% of $216,000 total sales)
Total budgeted selling and administrative expense
$ 20,660
P22-49B Preparing a financial budget—schedule of cash receipts, schedule of cash payments, cash
budget
Learning Objective 4
1. Total cash pmts. $179,935
2. Ending Cash bal. $35,765
Sosa Company has provided the following budget information for the first quarter of 2016:
Additional data related to the first quarter of 2016 for Sosa Company:
a. Capital expenditures include $36,000 for new manufacturing equipment, to be purchased and paid in
the first quarter.
b. Cash receipts are 60% of sales in the quarter of the sale and 40% in the quarter following the sale.
Requirements
1. Prepare Sosa Company’s schedule of cash receipts from customers and schedule of cash payments
for the first quarter of 2016.
2. Prepare Sosa Company’s cash budget for the first quarter of 2016.
SOLUTION
Requirement 1
Schedule of Cash Receipts from Customers
1st Qtr. 2016
Total sales
$ 297,500
Cash Receipts from Customers:
Accounts Receivable balance, December 31, 2015
Total cash receipts from customers
$ 201,700
Accounts Receivable balance, March 31, 2016:
$119,000
P22-49B, cont.
Requirement 1, cont.
Schedule of Cash Payments
1st Qtr. 2016
Total direct materials purchases
$ 39,450
Cash Payments
Direct Materials:
Accounts Payable balance, December 31, 2015
Total payments for direct materials
38,115
Direct Labor:
Total payments for direct labor
38,880
Manufacturing Overhead:
Variable manufacturing overhead
3,645
Insurance and property taxes
9,120
Total payments for manufacturing overhead
12,765
Selling and Administrative Expenses:
Salaries Expense
5,000
Rent Expense
3,000
Insurance Expense
1,200
Supplies Expense
2,975
Total payments for selling and administrative expenses
12,175
Income Taxes:
Total payments for income taxes
42,000
Capital Expenditures:
Total payments for capital expenditures
36,000
Total cash payments
Accounts Payable balance, March 31, 2016:
P22-49B, cont.
Requirement 2
SOSA COMPANY
Cash Budget
For the Quarter Ended March 31, 2016
Beginning cash balance
$ 14,000
Cash receipts
201,700
Cash available
215,700
Cash payments:
Purchases of direct materials
Direct labor
Manufacturing overhead
Selling and administrative expenses
Income taxes
Capital expenditures
Total cash payments
179,935
Ending cash balance
P22-50B Preparing a financial budget—budgeted income statement, balance sheet, and statement
of cash flows
Learning Objective 4
1. NI $55,810
2. FG inventory $13,810
Carson Company has the following post-closing trial balance on December 31, 2016:
The company’s accounting department has gathered the following budgeting information for the first
quarter of 2017:
Additional information:
a. Direct materials purchases are paid 60% in the quarter purchased and 40% in the next quarter.
b. Direct labor, manufacturing overhead, selling and administrative costs, and income tax expense are
paid in the quarter incurred.
Requirements
1. Prepare Carson Company’s budgeted income statement for the first quarter of 2017.
2. Prepare Carson Company’s budgeted balance sheet as of March 31, 2017. Hint: Use the budgeted
statement of cash flows prepared in Requirement 3 to determine the Cash balance.
3. Prepare Carson Company’s budgeted statement of cash flows for the first quarter of 2017.
SOLUTION
Requirement 1
CARSON COMPANY
Budgeted Income Statement
For the Quarter Ended March 31, 2017
P22-50B, cont.
Requirement 2
CARSON COMPANY
Budgeted Balance Sheet
March 31, 2017
Assets
Current Assets:
Cash (from statement of cash flows)
$ 43,365
Accounts Receivable (a)
27,225
Raw Materials Inventory (b)
8,000
Finished Goods Inventory (c)
13,810
Total Current Assets
$ 92,400
Property, Plant, and Equipment:
178,000
111,700
Total Assets
$ 204,100
Current Liabilities:
Accounts Payable (f)
$ 14,540
Stockholders’ Equity
Common Stock
$ 70,000
Retained Earnings (g)
119,560
Total Stockholders’ Equity
189,560
Total Liabilities and Stockholders’ Equity
$ 204,100
(a)
Accounts Receivable: Dec. 31 balance + total sales – customer payments = $21,600 +
$181,500 – $175,875 = $27,225
(b)
$36,350 – $36,350 = $8,000
(c)
$33,410 (from statement of cash flows calculations) = $14,540
(g)
P22-50B, cont.
Requirement 3
CARSON COMPANY
Budgeted Statement of Cash Flows
For the Quarter Ended March 31, 2017
Operating Activities:
Cash receipts from customers
$ 175,875
Cash payments for income taxes
Net cash provided by operating activities
$ 56,365
Investing Activities:
Cash payments for equipment purchases
Net cash used for investing activities
Financing Activities:
Net cash provided by (used for) financing activities
0
Net increase in cash
18,365
Cash balance, January 1, 2017
25,000
Cash balance, March 31,2017
$ 43,365
(h)
Cash payments for operating expenses:
Direct materials payments: Dec. 31 AP balance + 60% of
1st quarter purchases = $11,600 + (60% × $36,350)
$ 33,410
Direct labor
Manufacturing overhead:
Selling and administrative expenses
Total cash payments for operating expenses
$ 76,900
P22-51B Completing a comprehensive budgeting problem—manufacturing company
Learning Objectives 3, 4
1. 3rd Qtr. DM purchases $16,320
4th Qtr. total cash pmts. (before interest) $76,814
The Grilton Tire Company manufactures racing tires for bicycles. Grilton sells tires for $50 each.
Grilton is planning for the next year by developing a master budget by quarters. Grilton’s balance sheet
for December 31, 2016, follows:
Other data for Grilton Tire Company:
f. Each tire requires 0.40 hours of direct labor; direct labor costs average $16 per hour.
g. Variable manufacturing overhead is $2 per tire.
h. Fixed manufacturing overhead includes $4,500 per quarter in depreciation and $26,780 per quarter
for other costs, such as utilities, insurance, and property taxes.
i. Fixed selling and administrative expenses include $8,000 per quarter for salaries; $1,800 per quarter
for rent; $1,200 per quarter for insurance; and $500 per quarter for depreciation.
j. Variable selling and administrative expenses include supplies at 2% of sales.
k. Capital expenditures include $45,000 for new manufacturing equipment, to be purchased and paid in
the first quarter.
Requirements
1. Prepare Grilton’s operating budget and cash budget for 2017 by quarter. Required schedules and
budgets include: sales budget, production budget, direct materials budget, direct labor budget,
manufacturing overhead budget, cost of goods sold budget, selling and administrative expense
budget, schedule of cash receipts, schedule of cash payments, and cash budget. Manufacturing
overhead costs are allocated based on direct labor hours. Round all calculations to the nearest dollar.
2. Prepare Grilton’s annual financial budget for 2017, including budgeted income statement, budgeted
balance sheet, and budgeted statement of cash flows.
SOLUTION
Requirement 1
GRILTON TIRE COMPANY
Sales Budget
For the Year Ended December 31, 2017
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Budgeted tires to be sold
1,500
1,700
1,900
2,100
7,200
Sales price per tire
× $50
× $50
× $50
× $50
× $50
Total sales
$ 75,000
$ 85,000
$ 95,000
$ 105,000
$ 360,000
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Budgeted tires to be sold
1,500
1,700
1,900
2,100
7,200
(40% of next quarter’s sales)
Total tires needed
2,180
2,460
2,740
3,020
8,120
Less: Tires in beginning inventory
Budgeted tires to be produced
1,880
1,780
1,980
2,180
7,820
P22-51B, cont.
Requirement 1, cont.
GRILTON TIRE COMPANY
Direct Materials Budget
For the Year Ended December 31, 2017
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Budgeted tires to be produced
1,880
1,780
1,980
2,180
7,820
Direct materials cost per tire
× $8
× $8
× $8
× $8
× $8
Direct materials needed for production
Plus: Desired direct materials in ending inventory
(30% of next quarter’s needed for production)
4,272
4,752
5,232
2,400
2,400
Total direct materials needed
Less: Direct materials in beginning inventory
2,400
4,272
4,752
5,232
2,400
Budgeted purchases of direct materials
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Budgeted tires to be produced
1,880
1,780
1,980
2,180
7,820
Direct labor hours per tire
Direct labor hours needed for production
3,128
Direct labor cost per hour
Budgeted direct labor cost
P22-51B, cont.
Requirement 1, cont.
GRILTON TIRE COMPANY
Manufacturing Overhead Budget
For the Year Ended December 31, 2017
Budgeted tires to be produced
Variable overhead cost per tire
Budgeted variable overhead
Budgeted fixed overhead
Depreciation
Utilities, insurance, property taxes
Total budgeted fixed overhead
Budgeted manufacturing overhead costs
Direct labor hours
Predetermined overhead allocation rate
($140,760 / 3,128 DLHr)
First
Second
Third
Fourth
P22-51B, cont.
Requirement 1, cont.
Calculations for Cost of Goods Sold Budget:
Year ended December 31, 2017:
Direct materials cost per tire
$ 8.00
Direct labor cost per tire (0.4 DLHr/tire × $16/DLHr)
6.40
Manufacturing overhead cost per tire (0.4 DLHr/tire × $45/DLHr)
Total projected manufacturing cost per tire
Quarter
Quarter
Quarter
Quarter
38,880
P22-51B, cont.
Requirement 1, cont.
GRILTON TIRE COMPANY
Selling and Administrative Expense Budget
For the Year Ended December 31, 2017
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Salaries Expense
Rent Expense
Insurance Expense
Depreciation Expense
Supplies Expense (2% of sales)
Total budgeted selling and administrative expense
P22-51B, cont.
Requirement 1, cont.
Schedule of Cash Receipts from Customers
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Total sales
$ 75,000
$ 85,000
$ 95,000
$ 105,000
$ 360,000
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Cash Receipts from Customers:
Accounts Receivable balance, December 31, 2016
$ 40,000
$ 21,000
$ 23,800
$ 26,600
Total cash receipts from customers
$ 94,000
$ 82,200
$ 92,200
$ 102,200
$ 370,600
Accounts Receivable balance, December 31, 2017:
$29,400
P22-51B, cont.
Requirement 1, cont.
Schedule of Cash Payments
1st Qtr.
2nd Qtr.
3rd Qtr.
4th Qtr.
Total
Total direct materials purchases
$ 16,912
$ 14,720
$ 16,320
$ 14,608
$ 62,560
1st Qtr.
2nd Qtr.
3rd Qtr.
4th Qtr.
Total
Cash Payments
Direct Materials:
Accounts Payable balance, 12/31/16
$ 8,000
11,838
$ 5,074
10,304
$ 4,416
11,424
$ 4,896
10,226
Total payments for direct materials
19,838
15,378
15,840
15,122
$ 66,178
Direct Labor:
Total payments for direct labor
12,032
11,392
12,672
13,952
50,048
Manufacturing Overhead:
Variable manufacturing overhead
3,760
3,560
3,960
4,360
16,640
Utilities, insurance, property taxes
26,780
26,780
26,780
26,780
107,120
Total payments for mfg. overhead
30,540
30,340
30,740
31,140
122,760
Selling and Administrative Expenses:
Salaries Expense
8,000
8,000
8,000
8,000
32,000
Rent Expense
1,800
1,800
1,800
1,800
7,200
Insurance Expense
1,200
1,200
1,200
1,200
4,800
Supplies Expense
1,500
1,700
1,900
2,100
7,200
Total payments for S&A expenses
12,500
12,700
12,900
13,100
51,200
Income Taxes:
Total payments for income taxes
3,500
3,500
3,500
3,500
14,000
Capital Expenditures:
Total pmts. for capital expenditures
45,000
45,000
Total cash payments (before interest)
$ 73,310
Accounts Payable balance, December 31, 2017:
$4,382
P22-51B, cont.
Requirement 1, cont.
GRILTON TIRE COMPANY
Cash Budget
For the Year Ended December 31, 2017
First
Second
Third
Fourth
Quarter
Quarter
Quarter
Quarter
Total
Beginning cash balance
$ 39,000
$ 35,590
$ 35,090
$ 35,383
$ 39,000
Cash receipts
94,000
82,200
92,200
102,200
370,600
Cash available
133,000
117,790
127,290
137,583
409,600
Cash payments:
Purchases of direct materials
Direct labor
Manufacturing overhead
122,760
Selling and administrative expenses
Income taxes
Capital expenditures
0
Interest expense
Total cash payments
123,410
349,846
Ending cash balance before financing
44,090
51,383
60,754
59,754
Minimum cash balance desired
Projected cash excess (deficiency)
16,383
25,754
24,754
Financing:
Borrowing
26,000
0
26,000
Principal repayments
Ending cash balance
$ 35,590
$ 35,090
$ 35,383
$ 59,754
$ 59,754
P22-51B, cont.
Requirement 2
GRILTON TIRE COMPANY
Budgeted Income Statement
For the Year Ended December 31, 2017
Sales Revenue
$ 360,000
Cost of Goods Sold
232,260
Gross Profit
127,740
Selling and Administrative Expenses
Operating Income
Interest Expense
660
Income before Income Taxes
Income Tax Expense
Net Income
GRILTON TIRE COMPANY
Budgeted Balance Sheet
December 31, 2017
Assets
Current Assets:
Cash
$ 59,754
Accounts Receivable
29,400
Raw Materials Inventory
Finished Goods Inventory (920 tires at $32.40 each)
Total Current Assets
Property, Plant, and Equipment:
Equipment ($177,000 + $45,000 )
222,000
Less: Accumulated Depreciation ($42,000 + $18,000 + $2,000)
160,000
Total Assets
Liabilities
Current Liabilities:
Accounts Payable
$ 4,382
Stockholders’ Equity
Common Stock
Retained Earnings ($87,100 + $59,880 – $0)
146,980
Total Stockholders’ Equity
276,980
Total Liabilities and Stockholders’ Equity
P22-51B, cont.
Requirement 2, cont.
GRILTON TIRE COMPANY
Budgeted Statement of Cash Flows
For the Year Ended December 31, 2017
Operating Activities:
Cash receipts from customers
$ 370,600
Cash payments for operating expenses *
(290,186)
Cash payments for interest expense
(660)
Cash payments for income taxes
(14,000)
Net cash provided by operating activities
$ 65,754
Investing Activities:
Cash payments for equipment purchases
(45,000)
Net cash used for investing activities
Financing Activities:
Proceeds from issuance of notes payable
Payment of notes payable
(26,000)
Net cash provided by (used for) financing activities
Net increase in cash
20,754
Cash balance, January 1, 2017
39,000
Cash balance, December 31, 2017
$ 59,754