Monthly operating expenses for the company are given below: Variable: Assets Cash 4. Sales commissions Fixed: Advertising Rent Salaries Utilities Insurance Depreciation Accounts receivable ($26,000 February sales; $320,000 March sales) Insurance is paid on an annual basis, in November of each year. The company plans to purchase $16,000 in new equipment during May and $40,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $15,000 each quarter, payable in the first month of the following quarter. The company's balance sheet as of March 31 is given below: Inventory Prepaid insurance Property and equipment (net). Total assets 4% of sales Liabilities and Stockholders' Equity Accounts payable Dividends payable Common stock Retained earnings Total liabilities and stockholders' equity $200,000 $18,000 $106,000 $7,000 $3,000 $14,000 $ 74,000 346,000 104,000 21,000 950,000 $1,495,000 $ 100,000 15,000 800,000 580,000 $1,495,000 The company maintains a minimum cash balance of $50,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month. The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $50,000 in cash. Required: Prepare a master budget for the three-month period ending June 30. Include the following detailed schedules: 1. a. b. C. 1007 A sales budget, by month and in total. A schedule of expected cash collections, by month and in total. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. d. A schedule of expected cash disbursements for merchandise purchases, by month and in total. 2. A cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $50,000. 3. A budgeted income statement for the three-month period ending June 30. Use the contribution approach. A budgeted balance sheet as of June 30.
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.

 alt="budgetary control system and explain how the problems are likely to reduce the effectiveness
of the system.
2. Explain how Ferguson & Son Manufacturing Company's budgetary control system could be
revised to improve its effectiveness.
(CMA, adapted)
CASE 8-33 Master Budget with Supporting Schedules LO8-2, LO8-4, LO8-8, LO8-9, LO8-10
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of
earrings to various retail outlets located in shopping malls across the country. In the past, the com-
pany has done very little in the way of budgeting and at certain times of the year has experienced
a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master
budget for the upcoming second quarter. To this end, you have worked with accounting and other
areas to gather the information assembled below.
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The company sells many styles of earrings, but all are sold for the same price-$10 per pair.
Actual sales of earrings for the last three months and budgeted sales for the next six months follow
(in pairs of earrings):
6161 12012
January (actual)
February (actual)
March (actual)
April (budget)
May (budget)
June (budget)
July (budget)
0020,000
26,000
40,000 August (budget)
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65,000
100,000
September (budget)
50,000
30,000
28,000
25,000
The concentration of sales before and during May is due to Mother's Day. Sufficient inventory
should be on hand at the end of each month to supply 40% of the earrings sold in the following
month.
Suppliers are paid $4 for a pair of earrings. One-half of a month's purchases is paid for in
the month of purchase; the other half is paid for in the following month. All sales are on credit.
Only 20% of a month's sales are collected in the month of sale. An additional 70% is collected
in the following month, and the remaining 10% is collected in the second month following sale.
Bad debts have been negligible.
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