acct 212 homework 6 chapter 23

Formworks Company prepares monthly budgets. The current budget plans for a September ending inventory of 19,000 units. Company policy is to end each month with merchandise inventory equal to a specified percent of budgeted sales for the following month. Budgeted sales and merchandise purchases for the three most recent months follow.

Sales (Units)

Purchases (Units)

July

210,000

218,000

August

290,000

290,000

September

290,000

280,000

Section Break

Difficulty: Medium

Exercise 23-1 Preparation of merchandise purchases budgets (for three periods) L.O. P1

Learning Objective: 23-P1 Prepare each component of a master budget and link each to the budgeting process.

1.

Prepare the merchandise purchases budget for the months of July, August, and September. (Input all amounts as positive values. Omit the "%" sign in your response.)

Worksheet

Difficulty: Medium

Exercise 23-1 Part 1

Learning Objective: 23-P1 Prepare each component of a master budget and link each to the budgeting process.

2.

Compute the ratio of ending inventory to the next month’s sales for each budget prepared in part 1.(Omit the "%" sign in your response.)

Ratio of ending inventory to next month sales

10 %

3.

How many units are budgeted for sale in October?

Worksheet

Difficulty: Medium

Exercise 23-1 Part 3

Learning Objective: 23-P1 Prepare each component of a master budget and link each to the budgeting process.

Kasik Co. budgeted the following cash receipts and cash disbursements for the first three months of next year.

Cash
Receipts

Cash
Disbursements

January

$

525,000

$

477,000

February

403,500

354,000

March

478,000

522,000

According to a credit agreement with the company’s bank, Kasik promises to have a minimum cash balance of $30,000 at each month-end. In return, the bank has agreed that the company can borrow up to $160,000 at an annual interest rate of 12%, paid on the last day of each month. The interest is computed based on the beginning balance of the loan for the month. The company has a cash balance of $30,000 and a loan balance of $60,000 at January 1.

Prepare monthly cash budgets for each of the first three months of next year. (Input all amounts as positive values except negative preliminary cash balance and repayment of loan to bank which should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Worksheet

Difficulty: Medium

Exercise 23-2 Preparation of cash budgets (for three periods) L.O. P1

Learning Objective: 23-P1 Prepare each component of a master budget and link each to the budgeting process.

Use the following information to prepare the July cash budget for Sanchez Co. It should show expected cash receipts and cash disbursements for the month and the cash balance expected on July 31. (Input all amounts as positive values. Omit the "$" sign in your response.)

a.

Beginning cash balance on July 1: $75,000.

b.

Cash receipts from sales: 40% is collected in the month of sale, 50% in the next month, and 10% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are: May (actual), $1,860,000; June (actual), $1,250,000; and July (budgeted), $1,440,000.

c.

Payments on merchandise purchases: 50% in the month of purchase and 50% in the month following purchase. Purchases amounts are: June (actual), $500,000; and July (budgeted), $760,000.

d.

Budgeted cash disbursements for salaries in July: $180,000.

e.

Budgeted depreciation expense for July: $15,000.

f.

Other cash expenses budgeted for July: $180,000.

g.

Accrued income taxes due in July: $90,000.

h.

Bank loan interest due in July: $5,500.

Worksheet

Difficulty: Medium

Exercise 23-3 Preparation of a cash budget L.O. P1

Learning Objective: 23-P1 Prepare each component of a master budget and link each to the budgeting process.

Following information relates to Sanchez Co.

a.

Beginning cash balance on July 1: $40,000.

b.

Cash receipts from sales: 24% is collected in the month of sale, 50% in the next month, and 26% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are: May (actual), $1,376,000; June (actual), $960,000; and July (budgeted), $1,120,000.

c.

Payments on merchandise purchases: 48% in the month of purchase and 52% in the month following purchase. Purchases amounts are: June (actual), $344,000; and July (budgeted), $600,000.

d.

Budgeted cash disbursements for salaries in July: $168,800.

e.

Budgeted depreciation expense for July: $9,600.

f.

Other cash expenses budgeted for July: $120,000.

g.

Accrued income taxes due in July: $80,000 (related to June).

h.

Bank loan interest due in July: $5,280.

Additional Information:

a.

Cost of goods sold is 35% of sales.

b.

Inventory at the end of June is $64,000 and at the end of July is $272,000.

c.

Salaries payable on June 30 are $40,000 and are expected to be $32,000 on July 31.

d.

The equipment account balance is $1,280,000 on July 31. On June 30, the accumulated depreciation on equipment is $224,000.

e.

The $5,280 cash payment of interest represents the 1% monthly expense on a long-term bank loan of $528,000.

f.

Income taxes payable on July 31 are $151,312, and the income tax rate applicable to the company is 35%.

g.

The only other balance sheet accounts are: Common Stock, with a balance of $562,880 on June 30; and Retained Earnings, with a balance of $857,600 on June 30.

Prepare a budgeted income statement for the month of July and a budgeted balance sheet for July 31. (Be sure to list the assets and liabilities in order of their liquidity. Input all amounts as positive values. Omit the "$" sign in your response.)

Sand Dollar Company purchases all merchandise on credit. It recently budgeted the following month-end accounts payable balances and merchandise inventory balances. Cash payments on accounts payable during each month are expected to be: May, $1,300,000; June, $1,350,000; July, $1,300,000; and August, $1,600,000.

rev: 04_30_2012

Accounts
Payable

Merchandise Inventory

May 31

$

130,000

$

220,000

June 30

150,000

400,000

July 31

300,000

200,000

August 31

130,000

300,000

1.

Compute the budgeted amounts of merchandise purchases for June, July, and August. (Omit the "$" sign in your response.)

June

July

August

Budgeted merchandise purchases

$ 1,370,000

$ 1,450,000

$ 1,430,000

2.

Compute the budgeted amounts of cost of goods sold for June, July, and August. (Omit the "$" sign in your response.)

June

July

August

Budgeted cost of goods sold

$ 1,190,000

$ 1,650,000

$ 1,330,000

Worksheet

Difficulty: Medium

Exercise 23-6 Computing budgeted pu

Sound Check, a merchandising company specializing in home computer speakers, budgets its monthly cost of goods sold to equal 70% of sales. Its inventory policy calls for ending inventory in each month to equal 20% of the next month’s budgeted cost of goods sold. All purchases are on credit, and 20% of the purchases in a month is paid for in the same month. Another 30% is paid for during the first month after purchase, and the remaining 50% is paid for in the second month after purchase. The following sales budgets are set: July, $300,000; August, $240,000; September, $270,000; October, $225,000; and November, $215,000.

Section Break

Difficulty: Medium

Learning Objective: 23-P2 Link both operating and capital expenditures budgets to budgeted financial statements.

Exercise 23-7 Computing budgeted accounts payable and purchases-sales forecast in dollars L.O. P1, P2

Learning Objective: 23-P1 Prepare each component of a master budget and link each to the budgeting process.

(1)

Compute the budgeted merchandise purchases for July, August, September, and October. (Omit the "$" sign in your response.)

July

August

September

October

Budgeted merchandise purchases

$ 201,600

$ 172,200

$ 182,700

$ 156,100

Worksheet

Difficulty: Medium

Learning Objective: 23-P2 Link both operating and capital expenditures budgets to budgeted financial statements.

Exercise 23-7 Part 1

Learning Objective: 23-P1 Prepare each component of a master budget and link each to the budgeting process.

(2)

Compute the budgeted payments on accounts payable for September and October. (Omit the "$" sign in your response.)

September

October

Budgeted payments on accounts payable

$ 189,000

$ 172,130

Worksheet

Difficulty: Medium

Learning Objective: 23-P2 Link both operating and capital expenditures budgets to budgeted financial statements.

Exercise 23-7 Part 2

Learning Objective: 23-P1 Prepare each component of a master budget and link each to the budgeting process.

(3)

Compute the budgeted ending balances of accounts payable for September and October. (Omit the "$" sign in your response.)

September

October

Budgeted ending balances of accounts payable

$ 232,260

$ 216,230

Worksheet

Difficulty: Medium

Learning Objective: 23-P2 Link both operating and capital expenditures budgets to budgeted financial statements.

Exercise 23-7 Part 3

Learning Objective: 23-P1 Prepare each component of a master budget and link each to the budgeting process.

Nascar Company manufactures an innovative automobile transmission for electric cars. Management predicts that ending inventory for the first quarter will be 39,100 units. The following unit sales of the transmissions are expected during the rest of the year: second quarter, 220,000 units; third quarter, 488,000 units; and fourth quarter, 247,000 units. Company policy calls for the ending inventory of a quarter to equal 30% of the next quarter’s budgeted sales. Nascar Company reports direct materials requirements of 0.53 pounds per unit. It also aims to end each quarter with an ending inventory of direct materials equal to 30% of next quarter's budgeted materials requirements. Direct materials cost $177 per unit.

Required:

Prepare a direct materials budget for the second quarter. (Round your pounds per unit to 2 decimal places and other answers to the nearest dollar amount. Amounts to be deducted should be indicated with a minus sign. Omit the "$" & "lbs" signs in your response.)

Worksheet

Difficulty: Medium

Exercise 23-9A Direct materials budget L.O. P3

Learning Objective: 23-P3 Appendix 23A-Prepare production and manufacturing budgets.

Nascar Company manufactures an innovative automobile transmission for electric cars. Management predicts that ending inventory for the first quarter will be 37,600 units. The following unit sales of the transmissions are expected during the rest of the year: second quarter, 221,000 units; third quarter, 487,000 units; and fourth quarter, 240,000 units. Company policy calls for the ending inventory of a quarter to equal 32% of the next quarter’s budgeted sales. Each transmission requires 3.5 direct labor hours, at a cost of $18.6 per hour.

Required:

Prepare a direct labor budget for the second quarter. (Round per hour answers to 2 decimal places and other dollar values to nearest whole dollar amount. Omit the "$" sign in your response.)

Worksheet

Jake Company reports the following:

July

August

September

Sales

$

29,000

$

37,000

$

41,000

Purchases

17,110

21,830

29,000

Payments for purchases are made in the month after purchase. Selling expenses are 20% of sales, administrative expenses are 8% of sales, and both are paid in the month of sale. Rent expense of $1,800 is paid monthly. Depreciation expense is $1,600 per month.

Prepare a schedule of budgeted cash disbursements for August and September. (Input all amounts as positive value. Omit the "$" sign in your response.)

Worksheet

Difficulty: Medium

Exercise 23-11 Budgeted cash disbursements L.O. P1

Learning Objective: 23-P1 Prepare each component of a master budget and link each to the budgeting process.

Emily Company has sales on account and for cash. Specifically, 56% of its sales are on account and 44% are for cash. Credit sales are collected in full in the month following the sale. The company forecasts sales of $534,000 for April, $544,000 for May, and $569,000 for June. The beginning balance of Accounts Receivable is $299,400 on April 1.

Prepare a schedule of budgeted cash receipts for April, May, and June. (Input all amounts as positive values. Omit the "$" sign in your response.)

Worksheet

Difficulty: Medium

Exercise 23-12 Budgeted cash receipts L.O. P1

Learning Objective: 23-P1 Prepare each component of a master budget and link each to the budgeting process.

Kaizen Corp. requires a minimum $8,000 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month (paid monthly). Any excess cash is used to repay loans at month-end. The cash balance on July 1 is $8,400 and the company has no outstanding loans. Forecasted cash receipts (other than for loans received) and forecasted cash payments (other than for loan or interest payments) are:

July

August

September

Cash receipts

$

24,000

$

32,000

$

40,000

Cash disbursements

28,000

30,000

32,000

Prepare a cash budget for July, August, and September. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Round your intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

Worksheet

Difficulty: Medium

Exercise 23-13 Cash budget L.O. P1

Learning Objective: 23-P1 Prepare each component of a master budget and link each to the budgeting process.

Fabrice Corp. requires a minimum $7,900 cash balance. If necessary, loans are taken to meet this requirement at a cost of 2% interest per month (paid monthly). Any excess cash is used to repay loans at month-end. The cash balance on October 1 is $7,900 and the company has an outstanding loan of $3,900. Forecasted cash receipts (other than for loans received) and forecasted cash payments (other than for loan or interest payments) follow.

October

November

December

Cash receipts

$

23,900

$

17,900

$

21,900

Cash disbursements

26,850

16,900

14,100

Prepare a cash budget for October, November, and December. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Round your intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

Worksheet

Difficulty: Medium

Exercise 23-14 Cash budget L.O. P1

Learning Objective: 23-P1 Prepare each component of a master budget and link each to the budgeting process.

The following information is available for Zhao Company:

a.

The cash budget for March shows an ending bank loan of $18,000 and an ending cash balance of $65,200.

b.

The sales budget for March indicates sales of $136,000. Accounts receivable are expected to be 65% of the current-month sales.

c.

The merchandise purchases budget indicates that $90,600 in merchandise will be purchased on account in March. Purchases on account are paid 100% in the month following the purchase. Ending inventory for March is predicted to be 760 units at a cost of $35 each.

d.

The budgeted income statement for March shows net income of $49,600. Depreciation expense of $2,600 and $27,600 in income tax expense were used in computing net income for March. Accrued taxes will be paid in April.

e.

The balance sheet for February shows equipment of $82,400 with accumulated depreciation of $31,600, common stock of $33,000, and ending retained earnings of $9,600. There are no changes budgeted in the equipment or common stock accounts.

Prepare a budgeted balance sheet for March. (Be sure to list the assets and liabilities in order of their liquidity. Input all amounts as positive values. Omit the "$" sign your response.)

Worksheet

Difficulty: Medium

Exercise 23-17 Budgeted balance sheet L.O. P2

Learning Objective: 23-P2 Link both operating and capital expenditures budgets to budgeted financial statements.

Zulu, Inc., is preparing its master budget for the first quarter. The company sells a single product at a price of $25 per unit. Sales (in units) are forecasted at 41,000 for January, 61,000 for February, and 51,000 for March. Cost of goods sold is $12 per unit. Other expense information for the first quarter follows.

Commissions

10

%

of sales

Rent

$

18,000

per month

Advertising

14

%

of sales

Office salaries

$

71,000

per month

Depreciation

$

55,000

per month

Interest

14

%

annually on a $250,000 note payable

Tax rate

30

%

Prepare a budgeted income statement for this first quarter. (Input all amounts as positive values. Do not round intermediate calculations. Omit the "$" sign your response.)

Worksheet

Difficulty: Medium