The management of Zigby Manufacturing prepared the following balance sheet for March 31. ZIGBY MANUFACTURING Balance Sheet March 31 Assets Cash Accounts receivable $ 40,000 Liabilities 344,400 Raw materials inventory 98,500 325,540 Finished goods inventory Equipment Less: Accumulated depreciation 450,000 Common stock Retained earnings Total assets $1,258,440 Total liabilities and equity To prepare a master budget for April, May, and June, management gathers the following information. $ 600,000 150,000 Liabilities and Equity Accounts payable Loan payable Long-tere note payable Equity $ 201,000 12,000 500,000 335,000 210,440 $.713,000 545,440 $1,258,440 a. Sales for March total 20,500 units. Budgeted sales in units follow: April, 20.500; May, 19.500: June, 20,000, and July, 20,500. The product's selling price is $24.00 per unit and its total product cost is $19.85 per unit. b. Raw materials inventory consists solely of direct materials that cost $20 per pound. Company policy calls for a given month's ending materials inventory to equal 50% of the next month's direct materials requirements. The March 31 raw materials inventory is 4,925 pounds. The budgeted June 30 ending raw materials inventory is 4,000 pounds. Each finished unit requires 0.50 pound of direct materials c. Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's budgeted unit sales. The March 31 finished goods inventory'is 16,400 units. d. Each finished unit requires 0.50 hour of direct labor at a rate of $15 per hour. e. The predetermined variable overhead rate is $2.70 per direct labor hour. Depreciation of $20,000 per month is the only fixed factory overhead item. f. Sales commissions of 8% of sales are paid in the month of the sales. The sales manager's monthly salary is $3,000. Monthly general and administrative expenses include $12.000 for administrative salaries and 0.9% monthly interest on the long- term note payable.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
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