MULTI COLORED PICTURE ATTACHED IS THE PART I NEED HELP WITH SECOND IS PART OF THE INFORMATION GIVEN WITH THE QUESTION The Grady Tire Company manufactures racing tires for bicycles. Grady sells tires for $70 each. Grady is planning for the next year by developing a master budget by quarters. Grady's balance sheet for Decembe 31,2018, follows: a. Budgeted sales are 1,800 tires for the first quarter and expected to increase by 50 tires per quarter. Cash sales are expected to be 20% of total sales, with the remaining 80% of sales on account. b. Finished Goods Inventory on December 31, 2018 consists of 100 tires at $36 each. c. Desired ending Finished Goods Inventory is 50% of the next quarter's sales; first quarter sales for 2020 are expected be 2,000 tires. FIFO inventory costing method is used. d. Raw Materials Inventory on December 31, 2018, consists of 200 pounds of rubber compound used to manufacture the tires. e. Direct materials requirements are 2 pounds of a rubber compound per tire. The cost of the compound is $9.00 per pound. f. Desired ending Raw Materials Inventory is 40% of the next quarter's direct materials needed for production; desired ending inventory for December 31, 2019 is 200 pounds; indirect materials are insignificant and not considered for budgeting purposes. g. Each tire requires 0.20 hours of direct labor; direct labor costs average $8 per hour. h. Variable manufacturing overhead is $1 per tire. i. Fixed manufacturing overhead includes $5,500 per quarter in depreciation and $2,900 per quarter for other costs, such as utilities, insurance, and property taxes. j. Fixed selling and administrative expenses include $8,500 per quarter for salaries; $2,400 per quarter for rent; $900 per quarter for insurance; and $1,000 per quarter for depreciation. k. Variable selling and administrative expenses include supplies at 3% of sales. l. Capital expenditures include $30,000 for new manufacturing equipment, to be purchased and paid in the first quarter. m. Cash receipts for sales on account are 65% in the quarter of the sale and 35% in the quarter following the sale; December 31, 2018, Accounts Receivable is received in the first quarter of 2019; uncollectible accounts are considered insignificant and not considered for budgeting purposes. n. Direct materials purchases are paid 80% in the quarter purchased and 20% in the following quarter; December 31, 2018, Accounts Payable is paid in the first quarter of 2019. o. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred. p. Income tax expense is projected at $2,500 per quarter and is paid in the quarter incurred. q. Grady desires to maintain a minimum cash balance of $60,000 and borrows from the local bank as needed in increments of $1,000 at the beginning of the quarter; principal repayments are made at the beginning of the quarter when excess funds are available and in increments of $1,000; interest is 6% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter.

MULTI COLORED PICTURE ATTACHED IS THE PART I NEED HELP WITH SECOND IS PART OF THE INFORMATION GIVEN WITH THE QUESTION The Grady Tire Company manufactures racing tires for bicycles. Grady sells tires for $70 each. Grady is planning for the next year by developing a master budget by quarters. Grady's balance sheet for Decembe 31,2018, follows: a. Budgeted sales are 1,800 tires for the first quarter and expected to increase by 50 tires per quarter. Cash sales are expected to be 20% of total sales, with the remaining 80% of sales on account. b. Finished Goods Inventory on December 31, 2018 consists of 100 tires at $36 each. c. Desired ending Finished Goods Inventory is 50% of the next quarter's sales; first quarter sales for 2020 are expected be 2,000 tires. FIFO inventory costing method is used. d. Raw Materials Inventory on December 31, 2018, consists of 200 pounds of rubber compound used to manufacture the tires. e. Direct materials requirements are 2 pounds of a rubber compound per tire. The cost of the compound is $9.00 per pound. f. Desired ending Raw Materials Inventory is 40% of the next quarter's direct materials needed for production; desired ending inventory for December 31, 2019 is 200 pounds; indirect materials are insignificant and not considered for budgeting purposes. g. Each tire requires 0.20 hours of direct labor; direct labor costs average $8 per hour. h. Variable manufacturing overhead is $1 per tire. i. Fixed manufacturing overhead includes $5,500 per quarter in depreciation and $2,900 per quarter for other costs, such as utilities, insurance, and property taxes. j. Fixed selling and administrative expenses include $8,500 per quarter for salaries; $2,400 per quarter for rent; $900 per quarter for insurance; and $1,000 per quarter for depreciation. k. Variable selling and administrative expenses include supplies at 3% of sales. l. Capital expenditures include $30,000 for new manufacturing equipment, to be purchased and paid in the first quarter. m. Cash receipts for sales on account are 65% in the quarter of the sale and 35% in the quarter following the sale; December 31, 2018, Accounts Receivable is received in the first quarter of 2019; uncollectible accounts are considered insignificant and not considered for budgeting purposes. n. Direct materials purchases are paid 80% in the quarter purchased and 20% in the following quarter; December 31, 2018, Accounts Payable is paid in the first quarter of 2019. o. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred. p. Income tax expense is projected at $2,500 per quarter and is paid in the quarter incurred. q. Grady desires to maintain a minimum cash balance of $60,000 and borrows from the local bank as needed in increments of $1,000 at the beginning of the quarter; principal repayments are made at the beginning of the quarter when excess funds are available and in increments of $1,000; interest is 6% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

MULTI COLORED PICTURE ATTACHED IS THE PART I NEED HELP WITH

SECOND IS PART OF THE INFORMATION GIVEN WITH THE QUESTION

The Grady Tire Company manufactures racing tires for bicycles. Grady sells tires for $70 each. Grady is planning for the next year by developing a master budget by quarters. Grady's balance sheet for Decembe 31,2018, follows:

a. Budgeted sales are 1,800 tires for the first quarter and expected to increase by 50 tires per quarter. Cash sales are expected to be 20% of total sales, with the remaining 80% of sales on account.

b. Finished Goods Inventory on December 31, 2018 consists of 100 tires at $36 each.

c. Desired ending Finished Goods Inventory is 50% of the next quarter's sales; first quarter sales for 2020 are expected be 2,000 tires. FIFO inventory costing method is used.

d. Raw Materials Inventory on December 31, 2018, consists of 200 pounds of rubber compound used to manufacture the tires.

e. Direct materials requirements are 2 pounds of a rubber compound per tire. The cost of the compound is $9.00 per pound.

f. Desired ending Raw Materials Inventory is 40% of the next quarter's direct materials needed for production; desired ending inventory for December 31, 2019 is 200 pounds; indirect materials are insignificant and not considered for budgeting purposes.

g. Each tire requires 0.20 hours of direct labor; direct labor costs average $8 per hour.

h. Variable manufacturing overhead is $1 per tire.

i. Fixed manufacturing overhead includes $5,500 per quarter in depreciation and $2,900 per quarter for other costs, such as utilities, insurance, and property taxes.

j. Fixed selling and administrative expenses include $8,500 per quarter for salaries; $2,400 per quarter for rent; $900 per quarter for insurance; and $1,000 per quarter for depreciation.

k. Variable selling and administrative expenses include supplies at 3% of sales.

l. Capital expenditures include $30,000 for new manufacturing equipment, to be purchased and paid in the first quarter.

m. Cash receipts for sales on account are 65% in the quarter of the sale and 35% in the quarter following the sale; December 31, 2018, Accounts Receivable is received in the first quarter of 2019; uncollectible accounts are considered insignificant and not considered for budgeting purposes.

n. Direct materials purchases are paid 80% in the quarter purchased and 20% in the following quarter; December 31, 2018, Accounts Payable is paid in the first quarter of 2019.

o. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred.

p. Income tax expense is projected at $2,500 per quarter and is paid in the quarter incurred.

q. Grady desires to maintain a minimum cash balance of $60,000 and borrows from the local bank as needed in increments of $1,000 at the beginning of the quarter; principal repayments are made at the beginning of the quarter when excess funds are available and in increments of $1,000; interest is 6% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter.

Cash Payments
First
Second
Third
Fourth
Quarter
Quarter
Quarter
Quarter
Total
Total direct materials purchases
First
Second
Third
Fourth
Quarter
Quarter
Quarter
Quarter
Total
Cash Payments
Direct Materials:
Accounts Payable balance, December 31, 2018
1st Qtr.-Qtr. 1 direct material purchases paid in Qtr. 1
1st Qtr.-Qtr. 1 direct material purchases paid in Qtr. 2
2nd Qtr.-Qtr. 2 direct material purchases paid in Qtr. 2
2nd Qtr.-Qtr. 2 direct material purchases paid in Qtr. 3
3rd Qtr.-Qtr. 3 direct material purchases paid in Qtr. 3
3rd Qtr.-Qtr. 3 direct material purchases paid in Qtr. 4
4th Qtr.-Qtr. 4 direct material purchases paid in Qtr. 4
Total payments for direct materials
Direct Labor:

Data Table
Grady Tire Company
Balance Sheet
December 31, 2018
Assets
Current Assets:
Cash
$
65,000
Accounts Receivable
25,000
Raw Materials Inventory
1,800
Finished Goods Inventory
3,600
Total Current Assets
$
95,400
Property, Plant, and Equipment:
Equipment
177,000
Less: Accumulated Depreciation
(50,000)
127,000
$
222,400
Total Assets
Liabilities
Current Liabilities:
Accounts Payable
2$
16,000
Stockholders' Equity
Common Stock, no par
$
100,000
Retained Earnings
106,400
Total Stockholders' Equity
206,400
$
222,400
Total Liabilities and Stockholders' Equity

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