ACCOUNTING

Exercise 22-15 Merchandising: Cash budget LO P1

Castor, Inc. is preparing its master budget for the quarter ended June 30. Budgeted sales and cash payments for merchandise for the next three months follow:

 

  April May June
  Budgeted sales $ 31,500 $ 40,500 $ 24,500
  Budgeted cash payments for merchandise   21,200   16,300   16,700

 

Sales are 60% cash and 40% on credit. All credit sales are collected in the month following the sale. The March 30 balance sheet includes balances of $12,500 in cash, $12,500 in accounts receivable, $11,000 in accounts payable, and a $2,500 balance in loans payable. A minimum cash balance of $12,500 is required. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 2% per month based on the beginning of the month loan balance and is paid at each month-end. If an excess balance of cash exists, loans are repaid at the end of the month. Operating expenses are paid in the month incurred and consist of sales commissions (5% of sales), shipping (4% of sales), office salaries ($3,500 per month) and rent ($5,500 per month).

 

Prepare a cash budget for each of the months of April, May, and June.
 

Exercise 22-17 Merchandising: Budgeted balance sheet LO P2

The following information is available for Zetrov Company:

 

a. The cash budget for March shows an ending bank loan of $15,000 and an ending cash balance of $61,000.
b. The sales budget for March indicates sales of $130,000. Accounts receivable are expected to be 65% of the current-month sales.
c. The merchandise purchases budget indicates that $90,000 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 700 units at a cost of $35 each.
d. The budgeted income statement for March shows net income of $49,000. Depreciation expense of $2,000 and $27,000 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 $83,000 with accumulated depreciation of $31,000, common stock of $30,000, and ending retained earnings of $9,000. There are no changes budgeted in the equipment or common stock accounts.

 

Prepare a budgeted balance sheet for March.

 

 

Exercise 22-18 Merchandising: Budgeted income statement LO P2

Fortune, 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 40,000 for January, 60,000 for February, and 50,000 for March. Cost of goods sold is $12 per unit. Other expense information for the first quarter follows.

 

         
  Commissions   9 %  of sales
  Rent $ 18,000    per month
  Advertising   15 %  of sales
  Office salaries $ 76,000    per month
  Depreciation $ 49,000    per month
  Interest   12 %  annually on a $230,000 note payable
  Tax rate   30 %  

 

Prepare a budgeted income statement for this first quarter.

 

 

Exercise 22-19A Manufacturing: Direct labor budget LO P3

The production budget for Manner Company shows units to be produced as follows: July, 600; August, 660; September, 520. Each unit produced requires two hours of direct labor. The direct labor rate is currently $15 per hour but is predicted to be $15.75 per hour in September.

 

Prepare a direct labor budget for the months July, August, and September. (Round your “Labor rate” to 2 decimal places.)

 

 

Exercise 22-20A Manufacturing: Production budget LO P3

Hospitable Co. provides the following sales forecast for the next four months:

 

  April May June July
  Sales (units) 690 770 720 720

 

The company wants to end each month with ending finished goods inventory equal to 20% of next month’s sales. Finished goods inventory on April 1 is 138 units. Assume July’s budgeted production is 730 units.

 

 

Exercise 22-21A Direct materials budget LO P3

Hospitable Co. provides the following sales forecast for the next four months:

 

  April May June July
  Sales (units) 580 660 610 610

 

The company wants to end each month with ending finished goods inventory equal to 20% of next month’s sales. Finished goods inventory on April 1 is 116 units. Assume July’s budgeted production is 620 units. Assume each finished unit requires five pounds of raw materials and the company wants to end each month with raw materials inventory equal to 20% of next month’s production needs. Beginning raw materials inventory for April was 596 pounds.

 

 

Prepare a direct materials budget for April, May, and June.

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