Boston Accounting Services provides accounting services to small businesses. The following data relate to the preparation of a master budget for January 2017. 1. At the end of 2016, the company's general ledger indicated the following balances: Cash Accounts receivable Equipment (net) Total $ 62,000 48,000 80,000 $190,000 Accounts payable Note payable Common stock Retained earnings $ 40,000 10,000 50,000 90,000 $190,000 2. Revenue in December 2016 was $80,000, and revenue budgeted for January 2017 is $70,000. 3. Forty percent of revenue is collected in the month earned, and 60 percent is collected in the subsequent month. The receivable balance at the end of 2016 reflects revenue earned in December 2016. REQUIRED Complete the following budgets: 4. Monthly expenses (excluding interest expense) are budgeted as follows: salaries, $50,000; rent, $3,000; depreciation of equipment, $3,000; utilities, $1,000; other, $2,000. 5. Expenses are paid in the month incurred. Purchases of equipment are paid in the month after purchase. The $40,000 payable at the end of 2016 represents money owed for the purchase of equipment in December 2016. No purchases of equipment are anticipated for January. 6. The note is at 10 percent per annum and requires monthly interest payments of $83. The entire principal must be paid in October 2017. 7. The tax rate is 35 percent. Taxes are paid as incurred.
Boston Accounting Services provides accounting services to small businesses. The following data relate to the preparation of a master budget for January 2017. 1. At the end of 2016, the company's general ledger indicated the following balances: Cash Accounts receivable Equipment (net) Total $ 62,000 48,000 80,000 $190,000 Accounts payable Note payable Common stock Retained earnings $ 40,000 10,000 50,000 90,000 $190,000 2. Revenue in December 2016 was $80,000, and revenue budgeted for January 2017 is $70,000. 3. Forty percent of revenue is collected in the month earned, and 60 percent is collected in the subsequent month. The receivable balance at the end of 2016 reflects revenue earned in December 2016. REQUIRED Complete the following budgets: 4. Monthly expenses (excluding interest expense) are budgeted as follows: salaries, $50,000; rent, $3,000; depreciation of equipment, $3,000; utilities, $1,000; other, $2,000. 5. Expenses are paid in the month incurred. Purchases of equipment are paid in the month after purchase. The $40,000 payable at the end of 2016 represents money owed for the purchase of equipment in December 2016. No purchases of equipment are anticipated for January. 6. The note is at 10 percent per annum and requires monthly interest payments of $83. The entire principal must be paid in October 2017. 7. The tax rate is 35 percent. Taxes are paid as incurred.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Transcribed Image Text:Boston Accounting Services provides accounting services to small businesses. The following data
relate to the preparation of a master budget for January 2017.
1. At the end of 2016, the company's general ledger indicated the following balances:
Cash
Accounts receivable
Equipment (net)
Total
$ 62,000
48,000
80,000
$190,000
Accounts payable
Note payable
Common stock
Retained earnings
$ 40,000
10,000
50,000
90,000
$190,000
2. Revenue in December 2016 was $80,000, and revenue budgeted for January 2017 is
$70,000.
3. Forty percent of revenue is collected in the month earned, and 60 percent is collected in
the subsequent month. The receivable balance at the end of 2016 reflects revenue earned in
December 2016.
4. Monthly expenses (excluding interest expense) are budgeted as follows: salaries,
$50,000; rent, $3,000; depreciation of equipment, $3,000; utilities, $1,000; other,
$2,000.
REQUIRED
Complete the following budgets:
5. Expenses are paid in the month incurred. Purchases of equipment are paid in the month
after purchase. The $40,000 payable at the end of 2016 represents money owed for the
purchase of equipment in December 2016. No purchases of equipment are anticipated
for January.
6. The note is at 10 percent per annum and requires monthly interest payments of $83. The
entire principal must be paid in October 2017.
7. The tax rate is 35 percent. Taxes are paid as incurred.
Transcribed Image Text:b.
C.
a.
Cash Receipts
Collection of December 2016 revenue
Collection of January 2017 revenue
Total cash receipts
Cash Disbursements
Payment of salaries
Payment of rent
Payment of utilities
Payment of other expenses
Payment for purchases of computer equipment
Payment of interest on note
Payment of taxes
Total cash disbursements
Plus beginning cash balance
Ending cash balance
Revenue
Less:
Salaries
Rent
Utilities
Other expenses
Depreciation
Interest expense
Total expense
Income before taxes
Taxes on income at 35%
Net income
Assets
Cash
Cash Budget
For January 2017
Budgeted Income Statement
For January 2017
Accounts receivable
Equipment (net)
Total assets
Liabilities
Accounts payable
Note payable
Total liabilities
$
Budgeted Balance Sheet
As of January 31, 2017
Stockholders' Equity
Common stock
Retained earnings
Total stockholders' equity
Total liabilities and stockholders' equity
S
$
$
$
$
$
$
$
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