assembled to assist in preparing the master budget for the first quarter: a. As of December 31 (the end of the prior quarter), the company's general ledger showed the following account balances: Cash Accounts receivable Inventory Buildings and equipment (net) Accounts payable Common stock Retained earnings Debits. $ 58,000 Credits 214,400 60,450 368,000 $ 90,525 500,000 110,325 $ 700,850 $ 700,850 b. Actual sales for December and budgeted sales for the next four months are as follows: December (actual) January February March April $ 268,000 $ 403,000 $ 600,000 $ 315,000 $ 211,000 c. Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following sale. The accounts receivable at December 31 are a result of December credit sales. d. The company's gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.) e. Monthly expenses are budgeted as follows: salaries and wages, $33,000 per month: advertising, $63,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $44,980 for the quarter. f. Each month's ending inventory should equal 25% of the following month's cost of goods sold.
assembled to assist in preparing the master budget for the first quarter: a. As of December 31 (the end of the prior quarter), the company's general ledger showed the following account balances: Cash Accounts receivable Inventory Buildings and equipment (net) Accounts payable Common stock Retained earnings Debits. $ 58,000 Credits 214,400 60,450 368,000 $ 90,525 500,000 110,325 $ 700,850 $ 700,850 b. Actual sales for December and budgeted sales for the next four months are as follows: December (actual) January February March April $ 268,000 $ 403,000 $ 600,000 $ 315,000 $ 211,000 c. Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following sale. The accounts receivable at December 31 are a result of December credit sales. d. The company's gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.) e. Monthly expenses are budgeted as follows: salaries and wages, $33,000 per month: advertising, $63,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $44,980 for the quarter. f. Each month's ending inventory should equal 25% of the following month's cost of goods sold.
Chapter7: Budgeting
Section: Chapter Questions
Problem 6PB: Relevant data from the operating budget of The Framers are: Other data: Capital assets were sold in...
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Transcribed Image Text:assembled to assist in preparing the master budget for the first quarter:
a. As of December 31 (the end of the prior quarter), the company's general ledger showed the following account balances:
Cash
Accounts receivable
Inventory
Buildings and equipment (net)
Accounts payable
Common stock
Retained earnings
Debits.
$ 58,000
Credits
214,400
60,450
368,000
$ 90,525
500,000
110,325
$
700,850
$ 700,850
b. Actual sales for December and budgeted sales for the next four months are as follows:
December (actual)
January
February
March
April
$ 268,000
$ 403,000
$ 600,000
$ 315,000
$ 211,000
c. Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following sale. The accounts
receivable at December 31 are a result of December credit sales.
d. The company's gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.)
e. Monthly expenses are budgeted as follows: salaries and wages, $33,000 per month: advertising, $63,000 per month; shipping, 5%
of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be
$44,980 for the quarter.
f. Each month's ending inventory should equal 25% of the following month's cost of goods sold.
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