Chapter 20, Problem 4PSA

1.

To determine

To prepare: Sale budget of Z manufacturing.

Explanation of Solution

Statement that shows the sales budget of Z manufacturing

Z Manufacturing
Sales Budget
Particulars	April ($)	May ($)	June ($)	Total ($)
Sales unit (A)	20,500	19,500	20,000	60,000
Selling price Per unit (B)	23.85	23.85	23.85	23.85
Total sales $\left(\text{A}\times \text{B}\right)$	488,925	465,075	477,000	1,431,000
Table (1)

2.

To determine

To prepare: Production budget of Z manufacturing.

Explanation of Solution

Statement that shows the Production budget of Z manufacturing

Table (2)

3.

To determine

To prepare: Raw material budget of Z manufacturing.

Explanation of Solution

Statement that shows the raw material budget of Z manufacturing

Table (3)

4.

To determine

To prepare: Direct labor budget of Z manufacturing.

Explanation of Solution

Statement that shows the direct labor budget of Z manufacturing

Table (4)

5.

To determine

To prepare: Factory overhead budget of Z manufacturing.

Explanation of Solution

Statement that shows the factory overhead budget of Z manufacturing

Table (5)

6.

To determine

To prepare: Selling expense budget of Z manufacturing.

Explanation of Solution

Statement that shows the selling expense budget of Z manufacturing

Table (6)

7.

To determine

To prepare: General and administrative expense budget of Z manufacturing.

Explanation of Solution

Statement that shows the General and administrative expense budget of Z manufacturing

Table (7)

8.

To determine

To prepare: Cash budget of Z manufacturing.

Explanation of Solution

Statement that shows the Cash budget of Z manufacturing

Table (8)

Working Notes:

Table (9)

9.

To determine

To prepare: Budgeted income statement for the second quarter.

Explanation of Solution

Prepare income statement.

Z. Manufacturing
Income Statement
For three months ended June 30,2017
Particulars	Amount ($)	Amount ($)
Sales		1,431,000
Less: Cost of goods sold		1,191,000
Gross profit		240,000
Less: Operating expenses
Sales commission	114,480
Sales salaries	9000
General administrative salary	36000
Total operating expense		159,480
Earnings before interest and taxes		80,520
Less: Interest on long term notes		13,500
Interest on short term note		120
Earnings before taxes (A)		66,900
Less: Income tax $\left(\text{A}\times 35\%\right)$		23,415
Net income		43,485
Table (10)

Thus, budgeted net income of Z manufacturing is $43,485.

10.

To determine

To prepare: Budgeted balance sheet for the second quarter.

Explanation of Solution

Prepare balance sheet

Z. Manufacturing
Balance sheet
For three months ended June 30,2017
Particulars		Amount ($)
Assets
Cash	40,000
Account Receivables	333,900
Raw material inventory	80,000
Finished goods inventory	325,540
Total current assets		779,440
Equipment	730,000
Less: Accumulated depreciation	210,000
Net equipment		50,000
Total Assets		1,299,440
Liabilities and Stockholder’s Equity
Liabilities
Accounts Payable	182,000
Bank loan payable	16,752
Income tax payable	23,415
Total current liability		222,167
Long term payables		500,000
Total liabilities
Stockholder’s Equity
Common Stock	335,000
Retained earnings	242,273
Total stockholders’ equity		577,273
Total Liabilities and Stockholder’s equity		1,299,440
Table (11)

Working Notes:

Calculation of retained earnings,

$\begin{array}{c}\text{Closing retained earning}=\text{Opening retained earning}+\text{Net income}-\text{Dividend}\\ =\$208,788+\$43,485-\$10,000\\ =\$242,273\end{array}$

Hence, the total of the balance sheet of the Z Manufacturing as on June 30, 2017 is of $1,299,440.