Master Budget - Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them. Requirement 1- To prepare: Monthly sales budget

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Answer 1

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 22, Problem 8APSA

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 1-

To prepare:

Monthly sales budget

Expert Solution

Answer to Problem 8APSA

A sales budget is a budget which is used to estimate the expected units of sales in dollars and also helps to determine the estimated earnings during a period.

DIMSDALE SPORTS COMPANY
Monthly sales budget (in units and sales value)

	January	February	March	Quarter
Sales in units	7,000	9,000	11,000	27,000
Selling price per unit	$55	$55	$55	$55
Dollar sales value($)	385,000	495,000	605,000	1,485,000

Explanation of Solution

Dollar sales value for each month is calculated as follows-

Dollar sales value=Sales in units×Selling price per unitDollar sales value for January=7,000×$55 Dollar sales value for January=$385,000 Dollar sales value for February=9,000×$55 Dollar sales value for February=$495,000 Dollar sales value for March=11,000×$55 Dollar sales value for March=$605,000 Dollar sales value for Quarter=27,000×$55 Dollar sales value for Quarter=$1,485,000

Conclusion:

Thus, the monthly sales budget has been prepared both in units and sales value.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 2-

To prepare:

Merchandise purchases budget

Expert Solution

Answer to Problem 8APSA

Budgeted purchases:

Budgeted purchases are the estimates of purchases of a particular month based on the sales requirement and ending inventory requirement and the budgeted beginning inventory.

DIMSDALE SPORTS COMPANY
Monthly merchandise purchases budgets

	January	February	March	Quarter
Budgeted Sales for the month	7,000	9,000	11,000
Ending inventory in units	1,800	2,200	2,000
Total Needs	8,800	11,200	13,000
Less: Beginning inventory	(5,000)	(1,800)	(2,200)
Merchandise purchases in units required	3,800	9,400	10,800
Cost per unit	$30	$30	$30
Dollar value of purchases ($)	114,000	282,000	324,000	720,000

Explanation of Solution

First, ending inventory in units is required to be calculated-

Calculation of ending inventory in units is as under-

Ending inventory requirement = 20% of Next Months Expected sales unitsEnding inventory requirement for January =20%X Expected sales units for FebruaryEnding inventory requirement for January =20%X 9,000 unitsEnding inventory requirement for January =1,800 unitsEnding inventory requirement for February =20%X Expected sales units for MarchEnding inventory requirement for February =20% X 11,000 unitsEnding inventory requirement for February =2,200 unitsEnding inventory requirement for March =20%X Expected sales units for AprilEnding inventory requirement for March =20% X 10,000unitsEnding inventory requirement for March = 2,000 units

Now, Merchandise purchases required is to be calculated-

Required merchandise purchases= Ending Inventory + Expected sales of the month – Beginning Inventory

Given, Expected sales of the month-

January − 7,000 units
February − 9,000 units
March − 11,000 units

Ending inventory −

January − 1,800 units
February − 2,200 units
March − 2,000 units

Beginning inventory-

− Ending inventory of the previous month shall be beginning inventory of current month.

February − 1,800 units
March − 2,000 units

Total requirement for the month of January, February and March-

Required merchandise purchases = Ending Inventory + Expected sales of the month – Beginning Inventory Required merchandise purchases for January=1,800 units+7,000 units–5,000 units Required merchandise purchases for January=3,800 units Required merchandise purchases for February=2,200 units+9,000 units–1,800 units Required merchandise purchases for February =9,400units Required merchandise purchases for March=2,000 units+11,000 units–2,200 unitsRequired merchandise purchases for March=10,800units

Dollar Value of purchases is calculated as follows-

Dollar value of purchase =Required merchandise purchase × Cost per unit Dollar value of purchase for January=3,800 units×$30Dollar value of purchase for January=$114,000 Dollar value of purchase for February=9,400 units×$30 Dollar value of purchase for February=$282,000 Dollar value of purchase for March=10,800 units×$30 Dollar value of purchase for March=$324,000

Conclusion:

Thus, the merchandise purchase budget has been prepared for the months of January, February and March.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 3-

To prepare:

Monthly selling expense Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly Selling Expense budgets

	January ($)	February ($)	March ($)
Sales commissions	77,000	99,000	121,000
Sales salaries	5,000	5,000	5,000
Selling expenses	82,000	104,000	126,000

Explanation of Solution

First we need to calculate Sales commissions.

Calculation of sales commission is as under-

Sales Commission=20%×SalesSales Commission for January=20%×$385,000 Sales Commission for January=$77,000 Sales Commission for February=20%×$495,000 Sales Commission for February=$99,000 Sales Commission for March=20%×$605,000Sales Commission for March=$121,000

Sales salary for each month-

Sales salary for each month= $60,000 12 monthsSales salary for each month=$5,000

Selling expense for each month is calculated as under-

Selling Expense=Sales Commission+Sales salarySelling Expense for January=$77,000+$5,000 Selling Expense for January=$82,000 Selling Expense for February=$99,000+$5,000 Selling Expense for February=$104,000 Selling Expense for March=$121,000+$5,000 Selling Expense for March=$126,000

Conclusion:

Thus, the selling expense budget is prepared for the month of January, February and March.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 4-

To prepare:

Monthly general and administrative expense Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly general and administrative budgets

	January	February	March
Depreciation expense	6,000	7,000	7,300
General and administrative salaries	12,000	12,000	12,000
Maintenance expense	2,000	2,000	2,000
Total general and administrative expenses	20,000	21,000	21,300

Explanation of Solution

Given:

Maintenance Expense = $2,000 per month

General and administrative salaries for each month-

General and administrative salaries for each month= Total salary for year 12 monthsGeneral and administrative salaries for each month= $144,000 12 monthsGeneral and administrative salaries for each month=$12,000

Depreciation expense-

Given,

Beginning balance - $540,000

Purchase of equipment-

January -$36,000
February-$96,000
March-$28,800

January-

Equipment balance at the end of January= Beginning balance + purchasesEquipment balance at the end of January=$540,000+$36,000Equipment balance at the end of January=$576,000

Depreciation expense for January =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for January =( $576,0008years )× 1month 12 monthsDepreciation expense for January =$6,000

February-

Balance at the end of February = Balance at the end of January + PurchasesBalance at the end of February =$576,000+96,000Balance at the end of February =$672,000

Depreciation expense for February =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for February =( $672,0008years )× 1month 12 monthsDepreciation expense for February =$7,000

March-

Balance at the end of March = Balance at the end of February + PurchasesBalance at the end of March =$672,000+28,800Balance at the end of March =$700,800

Depreciation expense for March =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for March =( $700,8008years )× 1month 12 monthsDepreciation expense for March =$7,300

Total General and administrative expenses for each month is calculated as under-

Total General and administrative expenses= Depreciationexpense+General and administrative salaries +Maintenance Expense Total General and administrative expenses for January=$6,000+$12,000+$2,000Total General and administrative expenses for January=$20,000 Total General and administrative expenses for February=$7,000+$12,000+$2,000 Total General and administrative expenses for February=$21,000 Total General and administrative expenses for March=$7,300+$12,000+$2,000 Total General and administrative expenses for March=$21,300

Conclusion:

Thus, the general and administrative expenses budget is prepared for the month of January, February and March.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 5-

To prepare:

Monthly capital expenditures Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Capital Expenditures budget

	January	February	March	Quarter
Purchase of Equipment	36,000	96,000	28,800	160,800
Purchase of Land	0	0	150,000	150,000
Total Capital expenditure	36,000	96,000	178,800	310,800

Explanation of Solution

Given-

Purchase of Equipment in January = $36,000
Purchase of Equipment in February = $96,000
Purchase of Equipment in March = $28,800
Purchase of Land in March = $150,000

Total capital expenditure in March= Purchase of Equipment+ Purchase of LandTotal capital expenditure in March=$28,800 + $150,000Total capital expenditure in March=$178,800

Conclusion:

Thus, Capital expenditure budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 6-

To prepare:

Monthly Cash Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly cash budgets

	January	February	March
Beginning cash balance	36,000	30,100	210,300
Cash receipts:
Cash sales	96,250	123,750	151,250
Collection from -
Beginning accounts receivable	125,000	400,000
Credit sales of January		173,250	115,500
Credit sales of February			222,750
Total cash receipts	221,250	697,000	489,500
Total cash available	257,250	727,100	699,800
Less: Cash disbursements-
Merchandise purchases
Beginning accounts payable	80,000	280,000
January accounts payable		22,800	91,200
February accounts payable			56,400
Selling expenses (Req.3)	82,000	104,000	126,000
General and administrative expenses excluding depreciation (Req.4)	14,000	14,000	14,000
Capital Expenditure (Req.5)	36,000	96,000	178,800
Interest on bank loan	150
Total cash disbursements	212,150	516,800	466,400
Surplus/ ( deficiency) of cash	45,100	210,300	233,400
Borrowing / ( Repayment)	(15,000)
Ending cash balance	30,100	210,300	233,400

Explanation of Solution

Cash sales is calculated as under-

Cash sales = 25% ×Total sales of the month Cash sales for January=25%×$385,000 Cash sales for January=$96,250 Cash sales for February=25%×$495,000 Cash sales for February=$123,750 Cash sales for March=25%×$605,000Cash sales for March=$151,250

Beginning accounts receivable-

Given-

January-$125,000
February-$400,000

Credit Sales-

For the month of February-

Credit sale receipt in the month of February=60%×January Credit salesCredit sale receipt in the month of February=60%×[Total January sales ×75%]Credit sale receipt in the month of February=60%×[$385,000×75%]Credit sale receipt in the month of February=60%×$288,750Credit sale receipt in the month of February=$173,250

For the month of March-

Credit sale receipt ={40%×January Credit sales}+{60%×February Credit sales} Credit sale receipt ={40%×[Total January sales ×75%]}+{60%×[Total February sales ×75%]} Credit sale receipt ={40%×[$385,000×75%]}+{60%×[$495,000×75%]} Credit sale receipt ={40%×$288,750}+{60%×$371,250} Credit sale receipt =$115,500+$222,750Credit sale receipt =$338,250

Beginning accounts payable-

Given-

January-$80,000
February-$280,000

Calculation of accounts payable is as under-

For the month of February-

Accounts payable=20%×January purchases Accounts payable=20%×$114,000Accounts payable=$22,800

For the month of March-

Accounts payable=( 80%×January purchases)+( 20%×February purchases)Accounts payable=( 80%×$114,000)+( 20%×$282,000)Accounts payable=$91,200+$56,400Accounts payable=$147,600

Total cash available is calculated as under-

Total cash available = Beginning cash balance + Total cash receipts Total cash available for January =$36,000+221,250 Total cash available for January =$257,250 Total cash available for February =$30,100+$697,000 Total cash available for February =$727,100 Total cash available for March =$210,300+$489,500Total cash available for March =$699,800

Surplus of cash-

Surplus of cash = Total cash available – Total Cash disbursements Surplus of cash for January = $257,250−$212,150 Surplus of cash for January =$45,100 Surplus of cash for February =$727,100−$516,800 Surplus of cash for February =$210,300 Surplus of cash for March =$699,800−$466,400Surplus of cash for March =$233,400

Interest on bank loan = $15,000×1% = $150

Conclusion:

Thus, Cash budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 7-

To prepare:

Budgeted income statement

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Income Statement

Particulars	Amount ($)	Amount ($)
Sales (Req.1)		1,485,000
Cost of merchandise sold		810,000
Gross Profit		675,000
Operating expenses:
Selling expenses (Req.3)	312,000
General and administrative expenses (Req.4)	62,300
Interest on bank loan	150	374,450
Income before tax		300,550
Tax @ 40%		120,220
Net operating income		180,330

Explanation of Solution

Cost of merchandise sold-

Cost of merchandise sold = No. of units ×Cost priceCost of merchandise sold =27,000×$30Cost of merchandise sold =$810,000

Gross profit is calculated as under-

Gross profit = Sales – Cost of merchandise soldGross profit =$1,485,000−$810,000Gross profit =$675,000

Interest Expense-

Interest on bank loan = $15,000×1% = $150

Income before tax-

Income before tax= Sales−Cost of goods sold−Selling Expense −General and administrative expenses− Interest expenseIncome before tax=$1,485,000−$810,000−$312,000−$62,300−$150Income before tax=$300,550

Tax Expense-

Tax Expense=Income before tax×Tax RateTax Expense=$300,550×40%Tax Expense=$120,220

Net Operating income is calculated as under-

Net Operating income= Income before tax−Tax ExpenseNet Operating income=$300,550−$120,220Net Operating income=$180,330

Conclusion:

Thus, Income statement is prepared for the quarter.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 8-

To prepare:

Budgeted Balance sheet.

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Balance sheet as of March 31, 2020

	Amount ($)	Amount ($)
Assets
Cash	233,400
Accounts receivable	602,250
Inventory	60,000
Total current assets		895,650
Land		150,000
Equipment gross	610,800
Accumulated depreciation	(87,800)
Equipment net		523,000
Total assets		1,568,650
Stockholder's Equity and Liabilities
Accounts payable	549,600
Tax payable	120,220
Current liabilities		669,820
Common stock		472,500
Retained earnings		426,330
Total Stockholder's Equity and Liabilities		1,568,650

Explanation of Solution

Assets

Given,

Land = $150,000 (from Requirement 5)

Cash = $233,400 (from Requirement 6)

Calculation of total current assets is as under-

Current assets= Cash + Accounts receivable+Inventory Current assets=$233,400+$602,250+$60,000Current assets=$895,650

Accumulated Depreciation-

Accumulated depreciation=Beginning Accumulated depreciation+Depreciation expenses Accumulated depreciation=$67,500+$20,300Accumulated depreciation=$87,800

Equipment-

Equipment =Equipment gross−Accumulated Depreciation Equipment =$610,800−$87,800Equipment =$523,000

Calculation of total assets is as under-

Total Assets=Total Current assets+Land+Equipment Total Assets=$895,650+$150,000+$523,000Total Assets=$1,568,650

Total Stockholder's Equity and Liabilities Given,

Taxes payable = 120,220 (from requirement 7)

Common stock = $472,500

Accounts payable-$549,600

Calculation of Current liabilities is as under-

Current liabilities=Accounts payable+Taxes payableCurrent liabilities=$549,600+$120,220Current liabilities= $669,820

Retained earnings-

Retained earnings = Beginning retained earnings + Net IncomeRetained earnings =$246,000+$180,330Retained earnings =$426,330

Calculation of Total Stockholder's Equity and Liabilities is as under-

Total Stockholder's Equity and Liabilities=Current liabilities+Common stock+ Retained earnings Total Stockholder's Equity and Liabilities=$669,820+$472,500+$426,330Total Stockholder's Equity and Liabilities=$1,568,650

Conclusion:

Thus, Budgeted balance sheet is prepared with total of $1,568,650.

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 22, Problem 8APSA

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 1-

To prepare:

Monthly sales budget

Expert Solution

Answer to Problem 8APSA

A sales budget is a budget which is used to estimate the expected units of sales in dollars and also helps to determine the estimated earnings during a period.

DIMSDALE SPORTS COMPANY
Monthly sales budget (in units and sales value)

	January	February	March	Quarter
Sales in units	7,000	9,000	11,000	27,000
Selling price per unit	$55	$55	$55	$55
Dollar sales value($)	385,000	495,000	605,000	1,485,000

Explanation of Solution

Dollar sales value for each month is calculated as follows-

Dollar sales value=Sales in units×Selling price per unitDollar sales value for January=7,000×$55 Dollar sales value for January=$385,000 Dollar sales value for February=9,000×$55 Dollar sales value for February=$495,000 Dollar sales value for March=11,000×$55 Dollar sales value for March=$605,000 Dollar sales value for Quarter=27,000×$55 Dollar sales value for Quarter=$1,485,000

Conclusion:

Thus, the monthly sales budget has been prepared both in units and sales value.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 2-

To prepare:

Merchandise purchases budget

Expert Solution

Answer to Problem 8APSA

Budgeted purchases:

Budgeted purchases are the estimates of purchases of a particular month based on the sales requirement and ending inventory requirement and the budgeted beginning inventory.

DIMSDALE SPORTS COMPANY
Monthly merchandise purchases budgets

	January	February	March	Quarter
Budgeted Sales for the month	7,000	9,000	11,000
Ending inventory in units	1,800	2,200	2,000
Total Needs	8,800	11,200	13,000
Less: Beginning inventory	(5,000)	(1,800)	(2,200)
Merchandise purchases in units required	3,800	9,400	10,800
Cost per unit	$30	$30	$30
Dollar value of purchases ($)	114,000	282,000	324,000	720,000

Explanation of Solution

First, ending inventory in units is required to be calculated-

Calculation of ending inventory in units is as under-

Ending inventory requirement = 20% of Next Months Expected sales unitsEnding inventory requirement for January =20%X Expected sales units for FebruaryEnding inventory requirement for January =20%X 9,000 unitsEnding inventory requirement for January =1,800 unitsEnding inventory requirement for February =20%X Expected sales units for MarchEnding inventory requirement for February =20% X 11,000 unitsEnding inventory requirement for February =2,200 unitsEnding inventory requirement for March =20%X Expected sales units for AprilEnding inventory requirement for March =20% X 10,000unitsEnding inventory requirement for March = 2,000 units

Now, Merchandise purchases required is to be calculated-

Required merchandise purchases= Ending Inventory + Expected sales of the month – Beginning Inventory

Given, Expected sales of the month-

January − 7,000 units
February − 9,000 units
March − 11,000 units

Ending inventory −

January − 1,800 units
February − 2,200 units
March − 2,000 units

Beginning inventory-

− Ending inventory of the previous month shall be beginning inventory of current month.

February − 1,800 units
March − 2,000 units

Total requirement for the month of January, February and March-

Required merchandise purchases = Ending Inventory + Expected sales of the month – Beginning Inventory Required merchandise purchases for January=1,800 units+7,000 units–5,000 units Required merchandise purchases for January=3,800 units Required merchandise purchases for February=2,200 units+9,000 units–1,800 units Required merchandise purchases for February =9,400units Required merchandise purchases for March=2,000 units+11,000 units–2,200 unitsRequired merchandise purchases for March=10,800units

Dollar Value of purchases is calculated as follows-

Dollar value of purchase =Required merchandise purchase × Cost per unit Dollar value of purchase for January=3,800 units×$30Dollar value of purchase for January=$114,000 Dollar value of purchase for February=9,400 units×$30 Dollar value of purchase for February=$282,000 Dollar value of purchase for March=10,800 units×$30 Dollar value of purchase for March=$324,000

Conclusion:

Thus, the merchandise purchase budget has been prepared for the months of January, February and March.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 3-

To prepare:

Monthly selling expense Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly Selling Expense budgets

	January ($)	February ($)	March ($)
Sales commissions	77,000	99,000	121,000
Sales salaries	5,000	5,000	5,000
Selling expenses	82,000	104,000	126,000

Explanation of Solution

First we need to calculate Sales commissions.

Calculation of sales commission is as under-

Sales Commission=20%×SalesSales Commission for January=20%×$385,000 Sales Commission for January=$77,000 Sales Commission for February=20%×$495,000 Sales Commission for February=$99,000 Sales Commission for March=20%×$605,000Sales Commission for March=$121,000

Sales salary for each month-

Sales salary for each month= $60,000 12 monthsSales salary for each month=$5,000

Selling expense for each month is calculated as under-

Selling Expense=Sales Commission+Sales salarySelling Expense for January=$77,000+$5,000 Selling Expense for January=$82,000 Selling Expense for February=$99,000+$5,000 Selling Expense for February=$104,000 Selling Expense for March=$121,000+$5,000 Selling Expense for March=$126,000

Conclusion:

Thus, the selling expense budget is prepared for the month of January, February and March.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 4-

To prepare:

Monthly general and administrative expense Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly general and administrative budgets

	January	February	March
Depreciation expense	6,000	7,000	7,300
General and administrative salaries	12,000	12,000	12,000
Maintenance expense	2,000	2,000	2,000
Total general and administrative expenses	20,000	21,000	21,300

Explanation of Solution

Given:

Maintenance Expense = $2,000 per month

General and administrative salaries for each month-

General and administrative salaries for each month= Total salary for year 12 monthsGeneral and administrative salaries for each month= $144,000 12 monthsGeneral and administrative salaries for each month=$12,000

Depreciation expense-

Given,

Beginning balance - $540,000

Purchase of equipment-

January -$36,000
February-$96,000
March-$28,800

January-

Equipment balance at the end of January= Beginning balance + purchasesEquipment balance at the end of January=$540,000+$36,000Equipment balance at the end of January=$576,000

Depreciation expense for January =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for January =( $576,0008years )× 1month 12 monthsDepreciation expense for January =$6,000

February-

Balance at the end of February = Balance at the end of January + PurchasesBalance at the end of February =$576,000+96,000Balance at the end of February =$672,000

Depreciation expense for February =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for February =( $672,0008years )× 1month 12 monthsDepreciation expense for February =$7,000

March-

Balance at the end of March = Balance at the end of February + PurchasesBalance at the end of March =$672,000+28,800Balance at the end of March =$700,800

Depreciation expense for March =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for March =( $700,8008years )× 1month 12 monthsDepreciation expense for March =$7,300

Total General and administrative expenses for each month is calculated as under-

Total General and administrative expenses= Depreciationexpense+General and administrative salaries +Maintenance Expense Total General and administrative expenses for January=$6,000+$12,000+$2,000Total General and administrative expenses for January=$20,000 Total General and administrative expenses for February=$7,000+$12,000+$2,000 Total General and administrative expenses for February=$21,000 Total General and administrative expenses for March=$7,300+$12,000+$2,000 Total General and administrative expenses for March=$21,300

Conclusion:

Thus, the general and administrative expenses budget is prepared for the month of January, February and March.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 5-

To prepare:

Monthly capital expenditures Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Capital Expenditures budget

	January	February	March	Quarter
Purchase of Equipment	36,000	96,000	28,800	160,800
Purchase of Land	0	0	150,000	150,000
Total Capital expenditure	36,000	96,000	178,800	310,800

Explanation of Solution

Given-

Purchase of Equipment in January = $36,000
Purchase of Equipment in February = $96,000
Purchase of Equipment in March = $28,800
Purchase of Land in March = $150,000

Total capital expenditure in March= Purchase of Equipment+ Purchase of LandTotal capital expenditure in March=$28,800 + $150,000Total capital expenditure in March=$178,800

Conclusion:

Thus, Capital expenditure budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 6-

To prepare:

Monthly Cash Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly cash budgets

	January	February	March
Beginning cash balance	36,000	30,100	210,300
Cash receipts:
Cash sales	96,250	123,750	151,250
Collection from -
Beginning accounts receivable	125,000	400,000
Credit sales of January		173,250	115,500
Credit sales of February			222,750
Total cash receipts	221,250	697,000	489,500
Total cash available	257,250	727,100	699,800
Less: Cash disbursements-
Merchandise purchases
Beginning accounts payable	80,000	280,000
January accounts payable		22,800	91,200
February accounts payable			56,400
Selling expenses (Req.3)	82,000	104,000	126,000
General and administrative expenses excluding depreciation (Req.4)	14,000	14,000	14,000
Capital Expenditure (Req.5)	36,000	96,000	178,800
Interest on bank loan	150
Total cash disbursements	212,150	516,800	466,400
Surplus/ ( deficiency) of cash	45,100	210,300	233,400
Borrowing / ( Repayment)	(15,000)
Ending cash balance	30,100	210,300	233,400

Explanation of Solution

Cash sales is calculated as under-

Cash sales = 25% ×Total sales of the month Cash sales for January=25%×$385,000 Cash sales for January=$96,250 Cash sales for February=25%×$495,000 Cash sales for February=$123,750 Cash sales for March=25%×$605,000Cash sales for March=$151,250

Beginning accounts receivable-

Given-

January-$125,000
February-$400,000

Credit Sales-

For the month of February-

Credit sale receipt in the month of February=60%×January Credit salesCredit sale receipt in the month of February=60%×[Total January sales ×75%]Credit sale receipt in the month of February=60%×[$385,000×75%]Credit sale receipt in the month of February=60%×$288,750Credit sale receipt in the month of February=$173,250

For the month of March-

Credit sale receipt ={40%×January Credit sales}+{60%×February Credit sales} Credit sale receipt ={40%×[Total January sales ×75%]}+{60%×[Total February sales ×75%]} Credit sale receipt ={40%×[$385,000×75%]}+{60%×[$495,000×75%]} Credit sale receipt ={40%×$288,750}+{60%×$371,250} Credit sale receipt =$115,500+$222,750Credit sale receipt =$338,250

Beginning accounts payable-

Given-

January-$80,000
February-$280,000

Calculation of accounts payable is as under-

For the month of February-

Accounts payable=20%×January purchases Accounts payable=20%×$114,000Accounts payable=$22,800

For the month of March-

Accounts payable=( 80%×January purchases)+( 20%×February purchases)Accounts payable=( 80%×$114,000)+( 20%×$282,000)Accounts payable=$91,200+$56,400Accounts payable=$147,600

Total cash available is calculated as under-

Total cash available = Beginning cash balance + Total cash receipts Total cash available for January =$36,000+221,250 Total cash available for January =$257,250 Total cash available for February =$30,100+$697,000 Total cash available for February =$727,100 Total cash available for March =$210,300+$489,500Total cash available for March =$699,800

Surplus of cash-

Surplus of cash = Total cash available – Total Cash disbursements Surplus of cash for January = $257,250−$212,150 Surplus of cash for January =$45,100 Surplus of cash for February =$727,100−$516,800 Surplus of cash for February =$210,300 Surplus of cash for March =$699,800−$466,400Surplus of cash for March =$233,400

Interest on bank loan = $15,000×1% = $150

Conclusion:

Thus, Cash budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 7-

To prepare:

Budgeted income statement

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Income Statement

Particulars	Amount ($)	Amount ($)
Sales (Req.1)		1,485,000
Cost of merchandise sold		810,000
Gross Profit		675,000
Operating expenses:
Selling expenses (Req.3)	312,000
General and administrative expenses (Req.4)	62,300
Interest on bank loan	150	374,450
Income before tax		300,550
Tax @ 40%		120,220
Net operating income		180,330

Explanation of Solution

Cost of merchandise sold-

Cost of merchandise sold = No. of units ×Cost priceCost of merchandise sold =27,000×$30Cost of merchandise sold =$810,000

Gross profit is calculated as under-

Gross profit = Sales – Cost of merchandise soldGross profit =$1,485,000−$810,000Gross profit =$675,000

Interest Expense-

Interest on bank loan = $15,000×1% = $150

Income before tax-

Income before tax= Sales−Cost of goods sold−Selling Expense −General and administrative expenses− Interest expenseIncome before tax=$1,485,000−$810,000−$312,000−$62,300−$150Income before tax=$300,550

Tax Expense-

Tax Expense=Income before tax×Tax RateTax Expense=$300,550×40%Tax Expense=$120,220

Net Operating income is calculated as under-

Net Operating income= Income before tax−Tax ExpenseNet Operating income=$300,550−$120,220Net Operating income=$180,330

Conclusion:

Thus, Income statement is prepared for the quarter.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 8-

To prepare:

Budgeted Balance sheet.

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Balance sheet as of March 31, 2020

	Amount ($)	Amount ($)
Assets
Cash	233,400
Accounts receivable	602,250
Inventory	60,000
Total current assets		895,650
Land		150,000
Equipment gross	610,800
Accumulated depreciation	(87,800)
Equipment net		523,000
Total assets		1,568,650
Stockholder's Equity and Liabilities
Accounts payable	549,600
Tax payable	120,220
Current liabilities		669,820
Common stock		472,500
Retained earnings		426,330
Total Stockholder's Equity and Liabilities		1,568,650

Explanation of Solution

Assets

Given,

Land = $150,000 (from Requirement 5)

Cash = $233,400 (from Requirement 6)

Calculation of total current assets is as under-

Current assets= Cash + Accounts receivable+Inventory Current assets=$233,400+$602,250+$60,000Current assets=$895,650

Accumulated Depreciation-

Accumulated depreciation=Beginning Accumulated depreciation+Depreciation expenses Accumulated depreciation=$67,500+$20,300Accumulated depreciation=$87,800

Equipment-

Equipment =Equipment gross−Accumulated Depreciation Equipment =$610,800−$87,800Equipment =$523,000

Calculation of total assets is as under-

Total Assets=Total Current assets+Land+Equipment Total Assets=$895,650+$150,000+$523,000Total Assets=$1,568,650

Total Stockholder's Equity and Liabilities Given,

Taxes payable = 120,220 (from requirement 7)

Common stock = $472,500

Accounts payable-$549,600

Calculation of Current liabilities is as under-

Current liabilities=Accounts payable+Taxes payableCurrent liabilities=$549,600+$120,220Current liabilities= $669,820

Retained earnings-

Retained earnings = Beginning retained earnings + Net IncomeRetained earnings =$246,000+$180,330Retained earnings =$426,330

Calculation of Total Stockholder's Equity and Liabilities is as under-

Total Stockholder's Equity and Liabilities=Current liabilities+Common stock+ Retained earnings Total Stockholder's Equity and Liabilities=$669,820+$472,500+$426,330Total Stockholder's Equity and Liabilities=$1,568,650

Conclusion:

Thus, Budgeted balance sheet is prepared with total of $1,568,650.

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Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 22, Problem 8APSA

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 1-

To prepare:

Monthly sales budget

Expert Solution

Answer to Problem 8APSA

A sales budget is a budget which is used to estimate the expected units of sales in dollars and also helps to determine the estimated earnings during a period.

DIMSDALE SPORTS COMPANY
Monthly sales budget (in units and sales value)

	January	February	March	Quarter
Sales in units	7,000	9,000	11,000	27,000
Selling price per unit	$55	$55	$55	$55
Dollar sales value($)	385,000	495,000	605,000	1,485,000

Explanation of Solution

Dollar sales value for each month is calculated as follows-

Dollar sales value=Sales in units×Selling price per unitDollar sales value for January=7,000×$55 Dollar sales value for January=$385,000 Dollar sales value for February=9,000×$55 Dollar sales value for February=$495,000 Dollar sales value for March=11,000×$55 Dollar sales value for March=$605,000 Dollar sales value for Quarter=27,000×$55 Dollar sales value for Quarter=$1,485,000

Conclusion:

Thus, the monthly sales budget has been prepared both in units and sales value.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 2-

To prepare:

Merchandise purchases budget

Expert Solution

Answer to Problem 8APSA

Budgeted purchases:

Budgeted purchases are the estimates of purchases of a particular month based on the sales requirement and ending inventory requirement and the budgeted beginning inventory.

DIMSDALE SPORTS COMPANY
Monthly merchandise purchases budgets

	January	February	March	Quarter
Budgeted Sales for the month	7,000	9,000	11,000
Ending inventory in units	1,800	2,200	2,000
Total Needs	8,800	11,200	13,000
Less: Beginning inventory	(5,000)	(1,800)	(2,200)
Merchandise purchases in units required	3,800	9,400	10,800
Cost per unit	$30	$30	$30
Dollar value of purchases ($)	114,000	282,000	324,000	720,000

Explanation of Solution

First, ending inventory in units is required to be calculated-

Calculation of ending inventory in units is as under-

Ending inventory requirement = 20% of Next Months Expected sales unitsEnding inventory requirement for January =20%X Expected sales units for FebruaryEnding inventory requirement for January =20%X 9,000 unitsEnding inventory requirement for January =1,800 unitsEnding inventory requirement for February =20%X Expected sales units for MarchEnding inventory requirement for February =20% X 11,000 unitsEnding inventory requirement for February =2,200 unitsEnding inventory requirement for March =20%X Expected sales units for AprilEnding inventory requirement for March =20% X 10,000unitsEnding inventory requirement for March = 2,000 units

Now, Merchandise purchases required is to be calculated-

Required merchandise purchases= Ending Inventory + Expected sales of the month – Beginning Inventory

Given, Expected sales of the month-

January − 7,000 units
February − 9,000 units
March − 11,000 units

Ending inventory −

January − 1,800 units
February − 2,200 units
March − 2,000 units

Beginning inventory-

− Ending inventory of the previous month shall be beginning inventory of current month.

February − 1,800 units
March − 2,000 units

Total requirement for the month of January, February and March-

Required merchandise purchases = Ending Inventory + Expected sales of the month – Beginning Inventory Required merchandise purchases for January=1,800 units+7,000 units–5,000 units Required merchandise purchases for January=3,800 units Required merchandise purchases for February=2,200 units+9,000 units–1,800 units Required merchandise purchases for February =9,400units Required merchandise purchases for March=2,000 units+11,000 units–2,200 unitsRequired merchandise purchases for March=10,800units

Dollar Value of purchases is calculated as follows-

Dollar value of purchase =Required merchandise purchase × Cost per unit Dollar value of purchase for January=3,800 units×$30Dollar value of purchase for January=$114,000 Dollar value of purchase for February=9,400 units×$30 Dollar value of purchase for February=$282,000 Dollar value of purchase for March=10,800 units×$30 Dollar value of purchase for March=$324,000

Conclusion:

Thus, the merchandise purchase budget has been prepared for the months of January, February and March.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 3-

To prepare:

Monthly selling expense Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly Selling Expense budgets

	January ($)	February ($)	March ($)
Sales commissions	77,000	99,000	121,000
Sales salaries	5,000	5,000	5,000
Selling expenses	82,000	104,000	126,000

Explanation of Solution

First we need to calculate Sales commissions.

Calculation of sales commission is as under-

Sales Commission=20%×SalesSales Commission for January=20%×$385,000 Sales Commission for January=$77,000 Sales Commission for February=20%×$495,000 Sales Commission for February=$99,000 Sales Commission for March=20%×$605,000Sales Commission for March=$121,000

Sales salary for each month-

Sales salary for each month= $60,000 12 monthsSales salary for each month=$5,000

Selling expense for each month is calculated as under-

Selling Expense=Sales Commission+Sales salarySelling Expense for January=$77,000+$5,000 Selling Expense for January=$82,000 Selling Expense for February=$99,000+$5,000 Selling Expense for February=$104,000 Selling Expense for March=$121,000+$5,000 Selling Expense for March=$126,000

Conclusion:

Thus, the selling expense budget is prepared for the month of January, February and March.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 4-

To prepare:

Monthly general and administrative expense Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly general and administrative budgets

	January	February	March
Depreciation expense	6,000	7,000	7,300
General and administrative salaries	12,000	12,000	12,000
Maintenance expense	2,000	2,000	2,000
Total general and administrative expenses	20,000	21,000	21,300

Explanation of Solution

Given:

Maintenance Expense = $2,000 per month

General and administrative salaries for each month-

General and administrative salaries for each month= Total salary for year 12 monthsGeneral and administrative salaries for each month= $144,000 12 monthsGeneral and administrative salaries for each month=$12,000

Depreciation expense-

Given,

Beginning balance - $540,000

Purchase of equipment-

January -$36,000
February-$96,000
March-$28,800

January-

Equipment balance at the end of January= Beginning balance + purchasesEquipment balance at the end of January=$540,000+$36,000Equipment balance at the end of January=$576,000

Depreciation expense for January =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for January =( $576,0008years )× 1month 12 monthsDepreciation expense for January =$6,000

February-

Balance at the end of February = Balance at the end of January + PurchasesBalance at the end of February =$576,000+96,000Balance at the end of February =$672,000

Depreciation expense for February =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for February =( $672,0008years )× 1month 12 monthsDepreciation expense for February =$7,000

March-

Balance at the end of March = Balance at the end of February + PurchasesBalance at the end of March =$672,000+28,800Balance at the end of March =$700,800

Depreciation expense for March =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for March =( $700,8008years )× 1month 12 monthsDepreciation expense for March =$7,300

Total General and administrative expenses for each month is calculated as under-

Total General and administrative expenses= Depreciationexpense+General and administrative salaries +Maintenance Expense Total General and administrative expenses for January=$6,000+$12,000+$2,000Total General and administrative expenses for January=$20,000 Total General and administrative expenses for February=$7,000+$12,000+$2,000 Total General and administrative expenses for February=$21,000 Total General and administrative expenses for March=$7,300+$12,000+$2,000 Total General and administrative expenses for March=$21,300

Conclusion:

Thus, the general and administrative expenses budget is prepared for the month of January, February and March.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 5-

To prepare:

Monthly capital expenditures Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Capital Expenditures budget

	January	February	March	Quarter
Purchase of Equipment	36,000	96,000	28,800	160,800
Purchase of Land	0	0	150,000	150,000
Total Capital expenditure	36,000	96,000	178,800	310,800

Explanation of Solution

Given-

Purchase of Equipment in January = $36,000
Purchase of Equipment in February = $96,000
Purchase of Equipment in March = $28,800
Purchase of Land in March = $150,000

Total capital expenditure in March= Purchase of Equipment+ Purchase of LandTotal capital expenditure in March=$28,800 + $150,000Total capital expenditure in March=$178,800

Conclusion:

Thus, Capital expenditure budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 6-

To prepare:

Monthly Cash Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly cash budgets

	January	February	March
Beginning cash balance	36,000	30,100	210,300
Cash receipts:
Cash sales	96,250	123,750	151,250
Collection from -
Beginning accounts receivable	125,000	400,000
Credit sales of January		173,250	115,500
Credit sales of February			222,750
Total cash receipts	221,250	697,000	489,500
Total cash available	257,250	727,100	699,800
Less: Cash disbursements-
Merchandise purchases
Beginning accounts payable	80,000	280,000
January accounts payable		22,800	91,200
February accounts payable			56,400
Selling expenses (Req.3)	82,000	104,000	126,000
General and administrative expenses excluding depreciation (Req.4)	14,000	14,000	14,000
Capital Expenditure (Req.5)	36,000	96,000	178,800
Interest on bank loan	150
Total cash disbursements	212,150	516,800	466,400
Surplus/ ( deficiency) of cash	45,100	210,300	233,400
Borrowing / ( Repayment)	(15,000)
Ending cash balance	30,100	210,300	233,400

Explanation of Solution

Cash sales is calculated as under-

Cash sales = 25% ×Total sales of the month Cash sales for January=25%×$385,000 Cash sales for January=$96,250 Cash sales for February=25%×$495,000 Cash sales for February=$123,750 Cash sales for March=25%×$605,000Cash sales for March=$151,250

Beginning accounts receivable-

Given-

January-$125,000
February-$400,000

Credit Sales-

For the month of February-

Credit sale receipt in the month of February=60%×January Credit salesCredit sale receipt in the month of February=60%×[Total January sales ×75%]Credit sale receipt in the month of February=60%×[$385,000×75%]Credit sale receipt in the month of February=60%×$288,750Credit sale receipt in the month of February=$173,250

For the month of March-

Credit sale receipt ={40%×January Credit sales}+{60%×February Credit sales} Credit sale receipt ={40%×[Total January sales ×75%]}+{60%×[Total February sales ×75%]} Credit sale receipt ={40%×[$385,000×75%]}+{60%×[$495,000×75%]} Credit sale receipt ={40%×$288,750}+{60%×$371,250} Credit sale receipt =$115,500+$222,750Credit sale receipt =$338,250

Beginning accounts payable-

Given-

January-$80,000
February-$280,000

Calculation of accounts payable is as under-

For the month of February-

Accounts payable=20%×January purchases Accounts payable=20%×$114,000Accounts payable=$22,800

For the month of March-

Accounts payable=( 80%×January purchases)+( 20%×February purchases)Accounts payable=( 80%×$114,000)+( 20%×$282,000)Accounts payable=$91,200+$56,400Accounts payable=$147,600

Total cash available is calculated as under-

Total cash available = Beginning cash balance + Total cash receipts Total cash available for January =$36,000+221,250 Total cash available for January =$257,250 Total cash available for February =$30,100+$697,000 Total cash available for February =$727,100 Total cash available for March =$210,300+$489,500Total cash available for March =$699,800

Surplus of cash-

Surplus of cash = Total cash available – Total Cash disbursements Surplus of cash for January = $257,250−$212,150 Surplus of cash for January =$45,100 Surplus of cash for February =$727,100−$516,800 Surplus of cash for February =$210,300 Surplus of cash for March =$699,800−$466,400Surplus of cash for March =$233,400

Interest on bank loan = $15,000×1% = $150

Conclusion:

Thus, Cash budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 7-

To prepare:

Budgeted income statement

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Income Statement

Particulars	Amount ($)	Amount ($)
Sales (Req.1)		1,485,000
Cost of merchandise sold		810,000
Gross Profit		675,000
Operating expenses:
Selling expenses (Req.3)	312,000
General and administrative expenses (Req.4)	62,300
Interest on bank loan	150	374,450
Income before tax		300,550
Tax @ 40%		120,220
Net operating income		180,330

Explanation of Solution

Cost of merchandise sold-

Cost of merchandise sold = No. of units ×Cost priceCost of merchandise sold =27,000×$30Cost of merchandise sold =$810,000

Gross profit is calculated as under-

Gross profit = Sales – Cost of merchandise soldGross profit =$1,485,000−$810,000Gross profit =$675,000

Interest Expense-

Interest on bank loan = $15,000×1% = $150

Income before tax-

Income before tax= Sales−Cost of goods sold−Selling Expense −General and administrative expenses− Interest expenseIncome before tax=$1,485,000−$810,000−$312,000−$62,300−$150Income before tax=$300,550

Tax Expense-

Tax Expense=Income before tax×Tax RateTax Expense=$300,550×40%Tax Expense=$120,220

Net Operating income is calculated as under-

Net Operating income= Income before tax−Tax ExpenseNet Operating income=$300,550−$120,220Net Operating income=$180,330

Conclusion:

Thus, Income statement is prepared for the quarter.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 8-

To prepare:

Budgeted Balance sheet.

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Balance sheet as of March 31, 2020

	Amount ($)	Amount ($)
Assets
Cash	233,400
Accounts receivable	602,250
Inventory	60,000
Total current assets		895,650
Land		150,000
Equipment gross	610,800
Accumulated depreciation	(87,800)
Equipment net		523,000
Total assets		1,568,650
Stockholder's Equity and Liabilities
Accounts payable	549,600
Tax payable	120,220
Current liabilities		669,820
Common stock		472,500
Retained earnings		426,330
Total Stockholder's Equity and Liabilities		1,568,650

Explanation of Solution

Assets

Given,

Land = $150,000 (from Requirement 5)

Cash = $233,400 (from Requirement 6)

Calculation of total current assets is as under-

Current assets= Cash + Accounts receivable+Inventory Current assets=$233,400+$602,250+$60,000Current assets=$895,650

Accumulated Depreciation-

Accumulated depreciation=Beginning Accumulated depreciation+Depreciation expenses Accumulated depreciation=$67,500+$20,300Accumulated depreciation=$87,800

Equipment-

Equipment =Equipment gross−Accumulated Depreciation Equipment =$610,800−$87,800Equipment =$523,000

Calculation of total assets is as under-

Total Assets=Total Current assets+Land+Equipment Total Assets=$895,650+$150,000+$523,000Total Assets=$1,568,650

Total Stockholder's Equity and Liabilities Given,

Taxes payable = 120,220 (from requirement 7)

Common stock = $472,500

Accounts payable-$549,600

Calculation of Current liabilities is as under-

Current liabilities=Accounts payable+Taxes payableCurrent liabilities=$549,600+$120,220Current liabilities= $669,820

Retained earnings-

Retained earnings = Beginning retained earnings + Net IncomeRetained earnings =$246,000+$180,330Retained earnings =$426,330

Calculation of Total Stockholder's Equity and Liabilities is as under-

Total Stockholder's Equity and Liabilities=Current liabilities+Common stock+ Retained earnings Total Stockholder's Equity and Liabilities=$669,820+$472,500+$426,330Total Stockholder's Equity and Liabilities=$1,568,650

Conclusion:

Thus, Budgeted balance sheet is prepared with total of $1,568,650.

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Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 22, Problem 8APSA

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 1-

To prepare:

Monthly sales budget

Expert Solution

Answer to Problem 8APSA

A sales budget is a budget which is used to estimate the expected units of sales in dollars and also helps to determine the estimated earnings during a period.

DIMSDALE SPORTS COMPANY
Monthly sales budget (in units and sales value)

	January	February	March	Quarter
Sales in units	7,000	9,000	11,000	27,000
Selling price per unit	$55	$55	$55	$55
Dollar sales value($)	385,000	495,000	605,000	1,485,000

Explanation of Solution

Dollar sales value for each month is calculated as follows-

Dollar sales value=Sales in units×Selling price per unitDollar sales value for January=7,000×$55 Dollar sales value for January=$385,000 Dollar sales value for February=9,000×$55 Dollar sales value for February=$495,000 Dollar sales value for March=11,000×$55 Dollar sales value for March=$605,000 Dollar sales value for Quarter=27,000×$55 Dollar sales value for Quarter=$1,485,000

Conclusion:

Thus, the monthly sales budget has been prepared both in units and sales value.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 2-

To prepare:

Merchandise purchases budget

Expert Solution

Answer to Problem 8APSA

Budgeted purchases:

Budgeted purchases are the estimates of purchases of a particular month based on the sales requirement and ending inventory requirement and the budgeted beginning inventory.

DIMSDALE SPORTS COMPANY
Monthly merchandise purchases budgets

	January	February	March	Quarter
Budgeted Sales for the month	7,000	9,000	11,000
Ending inventory in units	1,800	2,200	2,000
Total Needs	8,800	11,200	13,000
Less: Beginning inventory	(5,000)	(1,800)	(2,200)
Merchandise purchases in units required	3,800	9,400	10,800
Cost per unit	$30	$30	$30
Dollar value of purchases ($)	114,000	282,000	324,000	720,000

Explanation of Solution

First, ending inventory in units is required to be calculated-

Calculation of ending inventory in units is as under-

Ending inventory requirement = 20% of Next Months Expected sales unitsEnding inventory requirement for January =20%X Expected sales units for FebruaryEnding inventory requirement for January =20%X 9,000 unitsEnding inventory requirement for January =1,800 unitsEnding inventory requirement for February =20%X Expected sales units for MarchEnding inventory requirement for February =20% X 11,000 unitsEnding inventory requirement for February =2,200 unitsEnding inventory requirement for March =20%X Expected sales units for AprilEnding inventory requirement for March =20% X 10,000unitsEnding inventory requirement for March = 2,000 units

Now, Merchandise purchases required is to be calculated-

Required merchandise purchases= Ending Inventory + Expected sales of the month – Beginning Inventory

Given, Expected sales of the month-

January − 7,000 units
February − 9,000 units
March − 11,000 units

Ending inventory −

January − 1,800 units
February − 2,200 units
March − 2,000 units

Beginning inventory-

− Ending inventory of the previous month shall be beginning inventory of current month.

February − 1,800 units
March − 2,000 units

Total requirement for the month of January, February and March-

Required merchandise purchases = Ending Inventory + Expected sales of the month – Beginning Inventory Required merchandise purchases for January=1,800 units+7,000 units–5,000 units Required merchandise purchases for January=3,800 units Required merchandise purchases for February=2,200 units+9,000 units–1,800 units Required merchandise purchases for February =9,400units Required merchandise purchases for March=2,000 units+11,000 units–2,200 unitsRequired merchandise purchases for March=10,800units

Dollar Value of purchases is calculated as follows-

Dollar value of purchase =Required merchandise purchase × Cost per unit Dollar value of purchase for January=3,800 units×$30Dollar value of purchase for January=$114,000 Dollar value of purchase for February=9,400 units×$30 Dollar value of purchase for February=$282,000 Dollar value of purchase for March=10,800 units×$30 Dollar value of purchase for March=$324,000

Conclusion:

Thus, the merchandise purchase budget has been prepared for the months of January, February and March.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 3-

To prepare:

Monthly selling expense Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly Selling Expense budgets

	January ($)	February ($)	March ($)
Sales commissions	77,000	99,000	121,000
Sales salaries	5,000	5,000	5,000
Selling expenses	82,000	104,000	126,000

Explanation of Solution

First we need to calculate Sales commissions.

Calculation of sales commission is as under-

Sales Commission=20%×SalesSales Commission for January=20%×$385,000 Sales Commission for January=$77,000 Sales Commission for February=20%×$495,000 Sales Commission for February=$99,000 Sales Commission for March=20%×$605,000Sales Commission for March=$121,000

Sales salary for each month-

Sales salary for each month= $60,000 12 monthsSales salary for each month=$5,000

Selling expense for each month is calculated as under-

Selling Expense=Sales Commission+Sales salarySelling Expense for January=$77,000+$5,000 Selling Expense for January=$82,000 Selling Expense for February=$99,000+$5,000 Selling Expense for February=$104,000 Selling Expense for March=$121,000+$5,000 Selling Expense for March=$126,000

Conclusion:

Thus, the selling expense budget is prepared for the month of January, February and March.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 4-

To prepare:

Monthly general and administrative expense Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly general and administrative budgets

	January	February	March
Depreciation expense	6,000	7,000	7,300
General and administrative salaries	12,000	12,000	12,000
Maintenance expense	2,000	2,000	2,000
Total general and administrative expenses	20,000	21,000	21,300

Explanation of Solution

Given:

Maintenance Expense = $2,000 per month

General and administrative salaries for each month-

General and administrative salaries for each month= Total salary for year 12 monthsGeneral and administrative salaries for each month= $144,000 12 monthsGeneral and administrative salaries for each month=$12,000

Depreciation expense-

Given,

Beginning balance - $540,000

Purchase of equipment-

January -$36,000
February-$96,000
March-$28,800

January-

Equipment balance at the end of January= Beginning balance + purchasesEquipment balance at the end of January=$540,000+$36,000Equipment balance at the end of January=$576,000

Depreciation expense for January =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for January =( $576,0008years )× 1month 12 monthsDepreciation expense for January =$6,000

February-

Balance at the end of February = Balance at the end of January + PurchasesBalance at the end of February =$576,000+96,000Balance at the end of February =$672,000

Depreciation expense for February =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for February =( $672,0008years )× 1month 12 monthsDepreciation expense for February =$7,000

March-

Balance at the end of March = Balance at the end of February + PurchasesBalance at the end of March =$672,000+28,800Balance at the end of March =$700,800

Depreciation expense for March =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for March =( $700,8008years )× 1month 12 monthsDepreciation expense for March =$7,300

Total General and administrative expenses for each month is calculated as under-

Total General and administrative expenses= Depreciationexpense+General and administrative salaries +Maintenance Expense Total General and administrative expenses for January=$6,000+$12,000+$2,000Total General and administrative expenses for January=$20,000 Total General and administrative expenses for February=$7,000+$12,000+$2,000 Total General and administrative expenses for February=$21,000 Total General and administrative expenses for March=$7,300+$12,000+$2,000 Total General and administrative expenses for March=$21,300

Conclusion:

Thus, the general and administrative expenses budget is prepared for the month of January, February and March.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 5-

To prepare:

Monthly capital expenditures Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Capital Expenditures budget

	January	February	March	Quarter
Purchase of Equipment	36,000	96,000	28,800	160,800
Purchase of Land	0	0	150,000	150,000
Total Capital expenditure	36,000	96,000	178,800	310,800

Explanation of Solution

Given-

Purchase of Equipment in January = $36,000
Purchase of Equipment in February = $96,000
Purchase of Equipment in March = $28,800
Purchase of Land in March = $150,000

Total capital expenditure in March= Purchase of Equipment+ Purchase of LandTotal capital expenditure in March=$28,800 + $150,000Total capital expenditure in March=$178,800

Conclusion:

Thus, Capital expenditure budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 6-

To prepare:

Monthly Cash Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly cash budgets

	January	February	March
Beginning cash balance	36,000	30,100	210,300
Cash receipts:
Cash sales	96,250	123,750	151,250
Collection from -
Beginning accounts receivable	125,000	400,000
Credit sales of January		173,250	115,500
Credit sales of February			222,750
Total cash receipts	221,250	697,000	489,500
Total cash available	257,250	727,100	699,800
Less: Cash disbursements-
Merchandise purchases
Beginning accounts payable	80,000	280,000
January accounts payable		22,800	91,200
February accounts payable			56,400
Selling expenses (Req.3)	82,000	104,000	126,000
General and administrative expenses excluding depreciation (Req.4)	14,000	14,000	14,000
Capital Expenditure (Req.5)	36,000	96,000	178,800
Interest on bank loan	150
Total cash disbursements	212,150	516,800	466,400
Surplus/ ( deficiency) of cash	45,100	210,300	233,400
Borrowing / ( Repayment)	(15,000)
Ending cash balance	30,100	210,300	233,400

Explanation of Solution

Cash sales is calculated as under-

Cash sales = 25% ×Total sales of the month Cash sales for January=25%×$385,000 Cash sales for January=$96,250 Cash sales for February=25%×$495,000 Cash sales for February=$123,750 Cash sales for March=25%×$605,000Cash sales for March=$151,250

Beginning accounts receivable-

Given-

January-$125,000
February-$400,000

Credit Sales-

For the month of February-

Credit sale receipt in the month of February=60%×January Credit salesCredit sale receipt in the month of February=60%×[Total January sales ×75%]Credit sale receipt in the month of February=60%×[$385,000×75%]Credit sale receipt in the month of February=60%×$288,750Credit sale receipt in the month of February=$173,250

For the month of March-

Credit sale receipt ={40%×January Credit sales}+{60%×February Credit sales} Credit sale receipt ={40%×[Total January sales ×75%]}+{60%×[Total February sales ×75%]} Credit sale receipt ={40%×[$385,000×75%]}+{60%×[$495,000×75%]} Credit sale receipt ={40%×$288,750}+{60%×$371,250} Credit sale receipt =$115,500+$222,750Credit sale receipt =$338,250

Beginning accounts payable-

Given-

January-$80,000
February-$280,000

Calculation of accounts payable is as under-

For the month of February-

Accounts payable=20%×January purchases Accounts payable=20%×$114,000Accounts payable=$22,800

For the month of March-

Accounts payable=( 80%×January purchases)+( 20%×February purchases)Accounts payable=( 80%×$114,000)+( 20%×$282,000)Accounts payable=$91,200+$56,400Accounts payable=$147,600

Total cash available is calculated as under-

Total cash available = Beginning cash balance + Total cash receipts Total cash available for January =$36,000+221,250 Total cash available for January =$257,250 Total cash available for February =$30,100+$697,000 Total cash available for February =$727,100 Total cash available for March =$210,300+$489,500Total cash available for March =$699,800

Surplus of cash-

Surplus of cash = Total cash available – Total Cash disbursements Surplus of cash for January = $257,250−$212,150 Surplus of cash for January =$45,100 Surplus of cash for February =$727,100−$516,800 Surplus of cash for February =$210,300 Surplus of cash for March =$699,800−$466,400Surplus of cash for March =$233,400

Interest on bank loan = $15,000×1% = $150

Conclusion:

Thus, Cash budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 7-

To prepare:

Budgeted income statement

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Income Statement

Particulars	Amount ($)	Amount ($)
Sales (Req.1)		1,485,000
Cost of merchandise sold		810,000
Gross Profit		675,000
Operating expenses:
Selling expenses (Req.3)	312,000
General and administrative expenses (Req.4)	62,300
Interest on bank loan	150	374,450
Income before tax		300,550
Tax @ 40%		120,220
Net operating income		180,330

Explanation of Solution

Cost of merchandise sold-

Cost of merchandise sold = No. of units ×Cost priceCost of merchandise sold =27,000×$30Cost of merchandise sold =$810,000

Gross profit is calculated as under-

Gross profit = Sales – Cost of merchandise soldGross profit =$1,485,000−$810,000Gross profit =$675,000

Interest Expense-

Interest on bank loan = $15,000×1% = $150

Income before tax-

Income before tax= Sales−Cost of goods sold−Selling Expense −General and administrative expenses− Interest expenseIncome before tax=$1,485,000−$810,000−$312,000−$62,300−$150Income before tax=$300,550

Tax Expense-

Tax Expense=Income before tax×Tax RateTax Expense=$300,550×40%Tax Expense=$120,220

Net Operating income is calculated as under-

Net Operating income= Income before tax−Tax ExpenseNet Operating income=$300,550−$120,220Net Operating income=$180,330

Conclusion:

Thus, Income statement is prepared for the quarter.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 8-

To prepare:

Budgeted Balance sheet.

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Balance sheet as of March 31, 2020

	Amount ($)	Amount ($)
Assets
Cash	233,400
Accounts receivable	602,250
Inventory	60,000
Total current assets		895,650
Land		150,000
Equipment gross	610,800
Accumulated depreciation	(87,800)
Equipment net		523,000
Total assets		1,568,650
Stockholder's Equity and Liabilities
Accounts payable	549,600
Tax payable	120,220
Current liabilities		669,820
Common stock		472,500
Retained earnings		426,330
Total Stockholder's Equity and Liabilities		1,568,650

Explanation of Solution

Assets

Given,

Land = $150,000 (from Requirement 5)

Cash = $233,400 (from Requirement 6)

Calculation of total current assets is as under-

Current assets= Cash + Accounts receivable+Inventory Current assets=$233,400+$602,250+$60,000Current assets=$895,650

Accumulated Depreciation-

Accumulated depreciation=Beginning Accumulated depreciation+Depreciation expenses Accumulated depreciation=$67,500+$20,300Accumulated depreciation=$87,800

Equipment-

Equipment =Equipment gross−Accumulated Depreciation Equipment =$610,800−$87,800Equipment =$523,000

Calculation of total assets is as under-

Total Assets=Total Current assets+Land+Equipment Total Assets=$895,650+$150,000+$523,000Total Assets=$1,568,650

Total Stockholder's Equity and Liabilities Given,

Taxes payable = 120,220 (from requirement 7)

Common stock = $472,500

Accounts payable-$549,600

Calculation of Current liabilities is as under-

Current liabilities=Accounts payable+Taxes payableCurrent liabilities=$549,600+$120,220Current liabilities= $669,820

Retained earnings-

Retained earnings = Beginning retained earnings + Net IncomeRetained earnings =$246,000+$180,330Retained earnings =$426,330

Calculation of Total Stockholder's Equity and Liabilities is as under-

Total Stockholder's Equity and Liabilities=Current liabilities+Common stock+ Retained earnings Total Stockholder's Equity and Liabilities=$669,820+$472,500+$426,330Total Stockholder's Equity and Liabilities=$1,568,650

Conclusion:

Thus, Budgeted balance sheet is prepared with total of $1,568,650.

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Answer 5

Chapter 22, Problem 8APSA

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 1-

To prepare:

Monthly sales budget

Expert Solution

Answer to Problem 8APSA

A sales budget is a budget which is used to estimate the expected units of sales in dollars and also helps to determine the estimated earnings during a period.

DIMSDALE SPORTS COMPANY
Monthly sales budget (in units and sales value)

	January	February	March	Quarter
Sales in units	7,000	9,000	11,000	27,000
Selling price per unit	$55	$55	$55	$55
Dollar sales value($)	385,000	495,000	605,000	1,485,000

Explanation of Solution

Dollar sales value for each month is calculated as follows-

Dollar sales value=Sales in units×Selling price per unitDollar sales value for January=7,000×$55 Dollar sales value for January=$385,000 Dollar sales value for February=9,000×$55 Dollar sales value for February=$495,000 Dollar sales value for March=11,000×$55 Dollar sales value for March=$605,000 Dollar sales value for Quarter=27,000×$55 Dollar sales value for Quarter=$1,485,000

Conclusion:

Thus, the monthly sales budget has been prepared both in units and sales value.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 2-

To prepare:

Merchandise purchases budget

Expert Solution

Answer to Problem 8APSA

Budgeted purchases:

Budgeted purchases are the estimates of purchases of a particular month based on the sales requirement and ending inventory requirement and the budgeted beginning inventory.

DIMSDALE SPORTS COMPANY
Monthly merchandise purchases budgets

	January	February	March	Quarter
Budgeted Sales for the month	7,000	9,000	11,000
Ending inventory in units	1,800	2,200	2,000
Total Needs	8,800	11,200	13,000
Less: Beginning inventory	(5,000)	(1,800)	(2,200)
Merchandise purchases in units required	3,800	9,400	10,800
Cost per unit	$30	$30	$30
Dollar value of purchases ($)	114,000	282,000	324,000	720,000

Explanation of Solution

First, ending inventory in units is required to be calculated-

Calculation of ending inventory in units is as under-

Ending inventory requirement = 20% of Next Months Expected sales unitsEnding inventory requirement for January =20%X Expected sales units for FebruaryEnding inventory requirement for January =20%X 9,000 unitsEnding inventory requirement for January =1,800 unitsEnding inventory requirement for February =20%X Expected sales units for MarchEnding inventory requirement for February =20% X 11,000 unitsEnding inventory requirement for February =2,200 unitsEnding inventory requirement for March =20%X Expected sales units for AprilEnding inventory requirement for March =20% X 10,000unitsEnding inventory requirement for March = 2,000 units

Now, Merchandise purchases required is to be calculated-

Required merchandise purchases= Ending Inventory + Expected sales of the month – Beginning Inventory

Given, Expected sales of the month-

January − 7,000 units
February − 9,000 units
March − 11,000 units

Ending inventory −

January − 1,800 units
February − 2,200 units
March − 2,000 units

Beginning inventory-

− Ending inventory of the previous month shall be beginning inventory of current month.

February − 1,800 units
March − 2,000 units

Total requirement for the month of January, February and March-

Required merchandise purchases = Ending Inventory + Expected sales of the month – Beginning Inventory Required merchandise purchases for January=1,800 units+7,000 units–5,000 units Required merchandise purchases for January=3,800 units Required merchandise purchases for February=2,200 units+9,000 units–1,800 units Required merchandise purchases for February =9,400units Required merchandise purchases for March=2,000 units+11,000 units–2,200 unitsRequired merchandise purchases for March=10,800units

Dollar Value of purchases is calculated as follows-

Dollar value of purchase =Required merchandise purchase × Cost per unit Dollar value of purchase for January=3,800 units×$30Dollar value of purchase for January=$114,000 Dollar value of purchase for February=9,400 units×$30 Dollar value of purchase for February=$282,000 Dollar value of purchase for March=10,800 units×$30 Dollar value of purchase for March=$324,000

Conclusion:

Thus, the merchandise purchase budget has been prepared for the months of January, February and March.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 3-

To prepare:

Monthly selling expense Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly Selling Expense budgets

	January ($)	February ($)	March ($)
Sales commissions	77,000	99,000	121,000
Sales salaries	5,000	5,000	5,000
Selling expenses	82,000	104,000	126,000

Explanation of Solution

First we need to calculate Sales commissions.

Calculation of sales commission is as under-

Sales Commission=20%×SalesSales Commission for January=20%×$385,000 Sales Commission for January=$77,000 Sales Commission for February=20%×$495,000 Sales Commission for February=$99,000 Sales Commission for March=20%×$605,000Sales Commission for March=$121,000

Sales salary for each month-

Sales salary for each month= $60,000 12 monthsSales salary for each month=$5,000

Selling expense for each month is calculated as under-

Selling Expense=Sales Commission+Sales salarySelling Expense for January=$77,000+$5,000 Selling Expense for January=$82,000 Selling Expense for February=$99,000+$5,000 Selling Expense for February=$104,000 Selling Expense for March=$121,000+$5,000 Selling Expense for March=$126,000

Conclusion:

Thus, the selling expense budget is prepared for the month of January, February and March.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 4-

To prepare:

Monthly general and administrative expense Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly general and administrative budgets

	January	February	March
Depreciation expense	6,000	7,000	7,300
General and administrative salaries	12,000	12,000	12,000
Maintenance expense	2,000	2,000	2,000
Total general and administrative expenses	20,000	21,000	21,300

Explanation of Solution

Given:

Maintenance Expense = $2,000 per month

General and administrative salaries for each month-

General and administrative salaries for each month= Total salary for year 12 monthsGeneral and administrative salaries for each month= $144,000 12 monthsGeneral and administrative salaries for each month=$12,000

Depreciation expense-

Given,

Beginning balance - $540,000

Purchase of equipment-

January -$36,000
February-$96,000
March-$28,800

January-

Equipment balance at the end of January= Beginning balance + purchasesEquipment balance at the end of January=$540,000+$36,000Equipment balance at the end of January=$576,000

Depreciation expense for January =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for January =( $576,0008years )× 1month 12 monthsDepreciation expense for January =$6,000

February-

Balance at the end of February = Balance at the end of January + PurchasesBalance at the end of February =$576,000+96,000Balance at the end of February =$672,000

Depreciation expense for February =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for February =( $672,0008years )× 1month 12 monthsDepreciation expense for February =$7,000

March-

Balance at the end of March = Balance at the end of February + PurchasesBalance at the end of March =$672,000+28,800Balance at the end of March =$700,800

Depreciation expense for March =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for March =( $700,8008years )× 1month 12 monthsDepreciation expense for March =$7,300

Total General and administrative expenses for each month is calculated as under-

Total General and administrative expenses= Depreciationexpense+General and administrative salaries +Maintenance Expense Total General and administrative expenses for January=$6,000+$12,000+$2,000Total General and administrative expenses for January=$20,000 Total General and administrative expenses for February=$7,000+$12,000+$2,000 Total General and administrative expenses for February=$21,000 Total General and administrative expenses for March=$7,300+$12,000+$2,000 Total General and administrative expenses for March=$21,300

Conclusion:

Thus, the general and administrative expenses budget is prepared for the month of January, February and March.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 5-

To prepare:

Monthly capital expenditures Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Capital Expenditures budget

	January	February	March	Quarter
Purchase of Equipment	36,000	96,000	28,800	160,800
Purchase of Land	0	0	150,000	150,000
Total Capital expenditure	36,000	96,000	178,800	310,800

Explanation of Solution

Given-

Purchase of Equipment in January = $36,000
Purchase of Equipment in February = $96,000
Purchase of Equipment in March = $28,800
Purchase of Land in March = $150,000

Total capital expenditure in March= Purchase of Equipment+ Purchase of LandTotal capital expenditure in March=$28,800 + $150,000Total capital expenditure in March=$178,800

Conclusion:

Thus, Capital expenditure budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 6-

To prepare:

Monthly Cash Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly cash budgets

	January	February	March
Beginning cash balance	36,000	30,100	210,300
Cash receipts:
Cash sales	96,250	123,750	151,250
Collection from -
Beginning accounts receivable	125,000	400,000
Credit sales of January		173,250	115,500
Credit sales of February			222,750
Total cash receipts	221,250	697,000	489,500
Total cash available	257,250	727,100	699,800
Less: Cash disbursements-
Merchandise purchases
Beginning accounts payable	80,000	280,000
January accounts payable		22,800	91,200
February accounts payable			56,400
Selling expenses (Req.3)	82,000	104,000	126,000
General and administrative expenses excluding depreciation (Req.4)	14,000	14,000	14,000
Capital Expenditure (Req.5)	36,000	96,000	178,800
Interest on bank loan	150
Total cash disbursements	212,150	516,800	466,400
Surplus/ ( deficiency) of cash	45,100	210,300	233,400
Borrowing / ( Repayment)	(15,000)
Ending cash balance	30,100	210,300	233,400

Explanation of Solution

Cash sales is calculated as under-

Cash sales = 25% ×Total sales of the month Cash sales for January=25%×$385,000 Cash sales for January=$96,250 Cash sales for February=25%×$495,000 Cash sales for February=$123,750 Cash sales for March=25%×$605,000Cash sales for March=$151,250

Beginning accounts receivable-

Given-

January-$125,000
February-$400,000

Credit Sales-

For the month of February-

Credit sale receipt in the month of February=60%×January Credit salesCredit sale receipt in the month of February=60%×[Total January sales ×75%]Credit sale receipt in the month of February=60%×[$385,000×75%]Credit sale receipt in the month of February=60%×$288,750Credit sale receipt in the month of February=$173,250

For the month of March-

Credit sale receipt ={40%×January Credit sales}+{60%×February Credit sales} Credit sale receipt ={40%×[Total January sales ×75%]}+{60%×[Total February sales ×75%]} Credit sale receipt ={40%×[$385,000×75%]}+{60%×[$495,000×75%]} Credit sale receipt ={40%×$288,750}+{60%×$371,250} Credit sale receipt =$115,500+$222,750Credit sale receipt =$338,250

Beginning accounts payable-

Given-

January-$80,000
February-$280,000

Calculation of accounts payable is as under-

For the month of February-

Accounts payable=20%×January purchases Accounts payable=20%×$114,000Accounts payable=$22,800

For the month of March-

Accounts payable=( 80%×January purchases)+( 20%×February purchases)Accounts payable=( 80%×$114,000)+( 20%×$282,000)Accounts payable=$91,200+$56,400Accounts payable=$147,600

Total cash available is calculated as under-

Total cash available = Beginning cash balance + Total cash receipts Total cash available for January =$36,000+221,250 Total cash available for January =$257,250 Total cash available for February =$30,100+$697,000 Total cash available for February =$727,100 Total cash available for March =$210,300+$489,500Total cash available for March =$699,800

Surplus of cash-

Surplus of cash = Total cash available – Total Cash disbursements Surplus of cash for January = $257,250−$212,150 Surplus of cash for January =$45,100 Surplus of cash for February =$727,100−$516,800 Surplus of cash for February =$210,300 Surplus of cash for March =$699,800−$466,400Surplus of cash for March =$233,400

Interest on bank loan = $15,000×1% = $150

Conclusion:

Thus, Cash budget is prepared.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 7-

To prepare:

Budgeted income statement

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Income Statement

Particulars	Amount ($)	Amount ($)
Sales (Req.1)		1,485,000
Cost of merchandise sold		810,000
Gross Profit		675,000
Operating expenses:
Selling expenses (Req.3)	312,000
General and administrative expenses (Req.4)	62,300
Interest on bank loan	150	374,450
Income before tax		300,550
Tax @ 40%		120,220
Net operating income		180,330

Explanation of Solution

Cost of merchandise sold-

Cost of merchandise sold = No. of units ×Cost priceCost of merchandise sold =27,000×$30Cost of merchandise sold =$810,000

Gross profit is calculated as under-

Gross profit = Sales – Cost of merchandise soldGross profit =$1,485,000−$810,000Gross profit =$675,000

Interest Expense-

Interest on bank loan = $15,000×1% = $150

Income before tax-

Income before tax= Sales−Cost of goods sold−Selling Expense −General and administrative expenses− Interest expenseIncome before tax=$1,485,000−$810,000−$312,000−$62,300−$150Income before tax=$300,550

Tax Expense-

Tax Expense=Income before tax×Tax RateTax Expense=$300,550×40%Tax Expense=$120,220

Net Operating income is calculated as under-

Net Operating income= Income before tax−Tax ExpenseNet Operating income=$300,550−$120,220Net Operating income=$180,330

Conclusion:

Thus, Income statement is prepared for the quarter.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 8-

To prepare:

Budgeted Balance sheet.

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Balance sheet as of March 31, 2020

	Amount ($)	Amount ($)
Assets
Cash	233,400
Accounts receivable	602,250
Inventory	60,000
Total current assets		895,650
Land		150,000
Equipment gross	610,800
Accumulated depreciation	(87,800)
Equipment net		523,000
Total assets		1,568,650
Stockholder's Equity and Liabilities
Accounts payable	549,600
Tax payable	120,220
Current liabilities		669,820
Common stock		472,500
Retained earnings		426,330
Total Stockholder's Equity and Liabilities		1,568,650

Explanation of Solution

Assets

Given,

Land = $150,000 (from Requirement 5)

Cash = $233,400 (from Requirement 6)

Calculation of total current assets is as under-

Current assets= Cash + Accounts receivable+Inventory Current assets=$233,400+$602,250+$60,000Current assets=$895,650

Accumulated Depreciation-

Accumulated depreciation=Beginning Accumulated depreciation+Depreciation expenses Accumulated depreciation=$67,500+$20,300Accumulated depreciation=$87,800

Equipment-

Equipment =Equipment gross−Accumulated Depreciation Equipment =$610,800−$87,800Equipment =$523,000

Calculation of total assets is as under-

Total Assets=Total Current assets+Land+Equipment Total Assets=$895,650+$150,000+$523,000Total Assets=$1,568,650

Total Stockholder's Equity and Liabilities Given,

Taxes payable = 120,220 (from requirement 7)

Common stock = $472,500

Accounts payable-$549,600

Calculation of Current liabilities is as under-

Current liabilities=Accounts payable+Taxes payableCurrent liabilities=$549,600+$120,220Current liabilities= $669,820

Retained earnings-

Retained earnings = Beginning retained earnings + Net IncomeRetained earnings =$246,000+$180,330Retained earnings =$426,330

Calculation of Total Stockholder's Equity and Liabilities is as under-

Total Stockholder's Equity and Liabilities=Current liabilities+Common stock+ Retained earnings Total Stockholder's Equity and Liabilities=$669,820+$472,500+$426,330Total Stockholder's Equity and Liabilities=$1,568,650

Conclusion:

Thus, Budgeted balance sheet is prepared with total of $1,568,650.

Answer 6

Chapter 22, Problem 8APSA

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 1-

To prepare:

Monthly sales budget

Expert Solution

Answer to Problem 8APSA

A sales budget is a budget which is used to estimate the expected units of sales in dollars and also helps to determine the estimated earnings during a period.

DIMSDALE SPORTS COMPANY
Monthly sales budget (in units and sales value)

	January	February	March	Quarter
Sales in units	7,000	9,000	11,000	27,000
Selling price per unit	$55	$55	$55	$55
Dollar sales value($)	385,000	495,000	605,000	1,485,000

Explanation of Solution

Dollar sales value for each month is calculated as follows-

Dollar sales value=Sales in units×Selling price per unitDollar sales value for January=7,000×$55 Dollar sales value for January=$385,000 Dollar sales value for February=9,000×$55 Dollar sales value for February=$495,000 Dollar sales value for March=11,000×$55 Dollar sales value for March=$605,000 Dollar sales value for Quarter=27,000×$55 Dollar sales value for Quarter=$1,485,000

Conclusion:

Thus, the monthly sales budget has been prepared both in units and sales value.

Answer 7

Chapter 22, Problem 8APSA

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 1-

To prepare:

Monthly sales budget

Answer 8

Expert Solution

Answer to Problem 8APSA

A sales budget is a budget which is used to estimate the expected units of sales in dollars and also helps to determine the estimated earnings during a period.

DIMSDALE SPORTS COMPANY
Monthly sales budget (in units and sales value)

	January	February	March	Quarter
Sales in units	7,000	9,000	11,000	27,000
Selling price per unit	$55	$55	$55	$55
Dollar sales value($)	385,000	495,000	605,000	1,485,000

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Dollar sales value for each month is calculated as follows-

Dollar sales value=Sales in units×Selling price per unitDollar sales value for January=7,000×$55 Dollar sales value for January=$385,000 Dollar sales value for February=9,000×$55 Dollar sales value for February=$495,000 Dollar sales value for March=11,000×$55 Dollar sales value for March=$605,000 Dollar sales value for Quarter=27,000×$55 Dollar sales value for Quarter=$1,485,000

Conclusion:

Thus, the monthly sales budget has been prepared both in units and sales value.

Answer 13

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 2-

To prepare:

Merchandise purchases budget

Expert Solution

Answer to Problem 8APSA

Budgeted purchases:

Budgeted purchases are the estimates of purchases of a particular month based on the sales requirement and ending inventory requirement and the budgeted beginning inventory.

DIMSDALE SPORTS COMPANY
Monthly merchandise purchases budgets

	January	February	March	Quarter
Budgeted Sales for the month	7,000	9,000	11,000
Ending inventory in units	1,800	2,200	2,000
Total Needs	8,800	11,200	13,000
Less: Beginning inventory	(5,000)	(1,800)	(2,200)
Merchandise purchases in units required	3,800	9,400	10,800
Cost per unit	$30	$30	$30
Dollar value of purchases ($)	114,000	282,000	324,000	720,000

Explanation of Solution

First, ending inventory in units is required to be calculated-

Calculation of ending inventory in units is as under-

Ending inventory requirement = 20% of Next Months Expected sales unitsEnding inventory requirement for January =20%X Expected sales units for FebruaryEnding inventory requirement for January =20%X 9,000 unitsEnding inventory requirement for January =1,800 unitsEnding inventory requirement for February =20%X Expected sales units for MarchEnding inventory requirement for February =20% X 11,000 unitsEnding inventory requirement for February =2,200 unitsEnding inventory requirement for March =20%X Expected sales units for AprilEnding inventory requirement for March =20% X 10,000unitsEnding inventory requirement for March = 2,000 units

Now, Merchandise purchases required is to be calculated-

Required merchandise purchases= Ending Inventory + Expected sales of the month – Beginning Inventory

Given, Expected sales of the month-

January − 7,000 units
February − 9,000 units
March − 11,000 units

Ending inventory −

January − 1,800 units
February − 2,200 units
March − 2,000 units

Beginning inventory-

− Ending inventory of the previous month shall be beginning inventory of current month.

February − 1,800 units
March − 2,000 units

Total requirement for the month of January, February and March-

Required merchandise purchases = Ending Inventory + Expected sales of the month – Beginning Inventory Required merchandise purchases for January=1,800 units+7,000 units–5,000 units Required merchandise purchases for January=3,800 units Required merchandise purchases for February=2,200 units+9,000 units–1,800 units Required merchandise purchases for February =9,400units Required merchandise purchases for March=2,000 units+11,000 units–2,200 unitsRequired merchandise purchases for March=10,800units

Dollar Value of purchases is calculated as follows-

Dollar value of purchase =Required merchandise purchase × Cost per unit Dollar value of purchase for January=3,800 units×$30Dollar value of purchase for January=$114,000 Dollar value of purchase for February=9,400 units×$30 Dollar value of purchase for February=$282,000 Dollar value of purchase for March=10,800 units×$30 Dollar value of purchase for March=$324,000

Conclusion:

Thus, the merchandise purchase budget has been prepared for the months of January, February and March.

Answer 14

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 2-

To prepare:

Merchandise purchases budget

Answer 15

Expert Solution

Answer to Problem 8APSA

Budgeted purchases:

Budgeted purchases are the estimates of purchases of a particular month based on the sales requirement and ending inventory requirement and the budgeted beginning inventory.

DIMSDALE SPORTS COMPANY
Monthly merchandise purchases budgets

	January	February	March	Quarter
Budgeted Sales for the month	7,000	9,000	11,000
Ending inventory in units	1,800	2,200	2,000
Total Needs	8,800	11,200	13,000
Less: Beginning inventory	(5,000)	(1,800)	(2,200)
Merchandise purchases in units required	3,800	9,400	10,800
Cost per unit	$30	$30	$30
Dollar value of purchases ($)	114,000	282,000	324,000	720,000

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

First, ending inventory in units is required to be calculated-

Calculation of ending inventory in units is as under-

Ending inventory requirement = 20% of Next Months Expected sales unitsEnding inventory requirement for January =20%X Expected sales units for FebruaryEnding inventory requirement for January =20%X 9,000 unitsEnding inventory requirement for January =1,800 unitsEnding inventory requirement for February =20%X Expected sales units for MarchEnding inventory requirement for February =20% X 11,000 unitsEnding inventory requirement for February =2,200 unitsEnding inventory requirement for March =20%X Expected sales units for AprilEnding inventory requirement for March =20% X 10,000unitsEnding inventory requirement for March = 2,000 units

Now, Merchandise purchases required is to be calculated-

Required merchandise purchases= Ending Inventory + Expected sales of the month – Beginning Inventory

Given, Expected sales of the month-

January − 7,000 units
February − 9,000 units
March − 11,000 units

Ending inventory −

January − 1,800 units
February − 2,200 units
March − 2,000 units

Beginning inventory-

− Ending inventory of the previous month shall be beginning inventory of current month.

February − 1,800 units
March − 2,000 units

Total requirement for the month of January, February and March-

Required merchandise purchases = Ending Inventory + Expected sales of the month – Beginning Inventory Required merchandise purchases for January=1,800 units+7,000 units–5,000 units Required merchandise purchases for January=3,800 units Required merchandise purchases for February=2,200 units+9,000 units–1,800 units Required merchandise purchases for February =9,400units Required merchandise purchases for March=2,000 units+11,000 units–2,200 unitsRequired merchandise purchases for March=10,800units

Dollar Value of purchases is calculated as follows-

Dollar value of purchase =Required merchandise purchase × Cost per unit Dollar value of purchase for January=3,800 units×$30Dollar value of purchase for January=$114,000 Dollar value of purchase for February=9,400 units×$30 Dollar value of purchase for February=$282,000 Dollar value of purchase for March=10,800 units×$30 Dollar value of purchase for March=$324,000

Conclusion:

Thus, the merchandise purchase budget has been prepared for the months of January, February and March.

Answer 20

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 3-

To prepare:

Monthly selling expense Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly Selling Expense budgets

	January ($)	February ($)	March ($)
Sales commissions	77,000	99,000	121,000
Sales salaries	5,000	5,000	5,000
Selling expenses	82,000	104,000	126,000

Explanation of Solution

First we need to calculate Sales commissions.

Calculation of sales commission is as under-

Sales Commission=20%×SalesSales Commission for January=20%×$385,000 Sales Commission for January=$77,000 Sales Commission for February=20%×$495,000 Sales Commission for February=$99,000 Sales Commission for March=20%×$605,000Sales Commission for March=$121,000

Sales salary for each month-

Sales salary for each month= $60,000 12 monthsSales salary for each month=$5,000

Selling expense for each month is calculated as under-

Selling Expense=Sales Commission+Sales salarySelling Expense for January=$77,000+$5,000 Selling Expense for January=$82,000 Selling Expense for February=$99,000+$5,000 Selling Expense for February=$104,000 Selling Expense for March=$121,000+$5,000 Selling Expense for March=$126,000

Conclusion:

Thus, the selling expense budget is prepared for the month of January, February and March.

Answer 21

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 3-

To prepare:

Monthly selling expense Budget

Answer 22

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly Selling Expense budgets

	January ($)	February ($)	March ($)
Sales commissions	77,000	99,000	121,000
Sales salaries	5,000	5,000	5,000
Selling expenses	82,000	104,000	126,000

Answer 23

Expert Solution

Answer 24

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

First we need to calculate Sales commissions.

Calculation of sales commission is as under-

Sales Commission=20%×SalesSales Commission for January=20%×$385,000 Sales Commission for January=$77,000 Sales Commission for February=20%×$495,000 Sales Commission for February=$99,000 Sales Commission for March=20%×$605,000Sales Commission for March=$121,000

Sales salary for each month-

Sales salary for each month= $60,000 12 monthsSales salary for each month=$5,000

Selling expense for each month is calculated as under-

Selling Expense=Sales Commission+Sales salarySelling Expense for January=$77,000+$5,000 Selling Expense for January=$82,000 Selling Expense for February=$99,000+$5,000 Selling Expense for February=$104,000 Selling Expense for March=$121,000+$5,000 Selling Expense for March=$126,000

Conclusion:

Thus, the selling expense budget is prepared for the month of January, February and March.

Answer 27

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 4-

To prepare:

Monthly general and administrative expense Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly general and administrative budgets

	January	February	March
Depreciation expense	6,000	7,000	7,300
General and administrative salaries	12,000	12,000	12,000
Maintenance expense	2,000	2,000	2,000
Total general and administrative expenses	20,000	21,000	21,300

Explanation of Solution

Given:

Maintenance Expense = $2,000 per month

General and administrative salaries for each month-

General and administrative salaries for each month= Total salary for year 12 monthsGeneral and administrative salaries for each month= $144,000 12 monthsGeneral and administrative salaries for each month=$12,000

Depreciation expense-

Given,

Beginning balance - $540,000

Purchase of equipment-

January -$36,000
February-$96,000
March-$28,800

January-

Equipment balance at the end of January= Beginning balance + purchasesEquipment balance at the end of January=$540,000+$36,000Equipment balance at the end of January=$576,000

Depreciation expense for January =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for January =( $576,0008years )× 1month 12 monthsDepreciation expense for January =$6,000

February-

Balance at the end of February = Balance at the end of January + PurchasesBalance at the end of February =$576,000+96,000Balance at the end of February =$672,000

Depreciation expense for February =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for February =( $672,0008years )× 1month 12 monthsDepreciation expense for February =$7,000

March-

Balance at the end of March = Balance at the end of February + PurchasesBalance at the end of March =$672,000+28,800Balance at the end of March =$700,800

Depreciation expense for March =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for March =( $700,8008years )× 1month 12 monthsDepreciation expense for March =$7,300

Total General and administrative expenses for each month is calculated as under-

Total General and administrative expenses= Depreciationexpense+General and administrative salaries +Maintenance Expense Total General and administrative expenses for January=$6,000+$12,000+$2,000Total General and administrative expenses for January=$20,000 Total General and administrative expenses for February=$7,000+$12,000+$2,000 Total General and administrative expenses for February=$21,000 Total General and administrative expenses for March=$7,300+$12,000+$2,000 Total General and administrative expenses for March=$21,300

Conclusion:

Thus, the general and administrative expenses budget is prepared for the month of January, February and March.

Answer 28

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 4-

To prepare:

Monthly general and administrative expense Budget

Answer 29

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly general and administrative budgets

	January	February	March
Depreciation expense	6,000	7,000	7,300
General and administrative salaries	12,000	12,000	12,000
Maintenance expense	2,000	2,000	2,000
Total general and administrative expenses	20,000	21,000	21,300

Answer 30

Expert Solution

Answer 31

Expert Solution

Answer 32

Expert Solution

Answer 33

Explanation of Solution

Given:

Maintenance Expense = $2,000 per month

General and administrative salaries for each month-

General and administrative salaries for each month= Total salary for year 12 monthsGeneral and administrative salaries for each month= $144,000 12 monthsGeneral and administrative salaries for each month=$12,000

Depreciation expense-

Given,

Beginning balance - $540,000

Purchase of equipment-

January -$36,000
February-$96,000
March-$28,800

January-

Equipment balance at the end of January= Beginning balance + purchasesEquipment balance at the end of January=$540,000+$36,000Equipment balance at the end of January=$576,000

Depreciation expense for January =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for January =( $576,0008years )× 1month 12 monthsDepreciation expense for January =$6,000

February-

Balance at the end of February = Balance at the end of January + PurchasesBalance at the end of February =$576,000+96,000Balance at the end of February =$672,000

Depreciation expense for February =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for February =( $672,0008years )× 1month 12 monthsDepreciation expense for February =$7,000

March-

Balance at the end of March = Balance at the end of February + PurchasesBalance at the end of March =$672,000+28,800Balance at the end of March =$700,800

Depreciation expense for March =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for March =( $700,8008years )× 1month 12 monthsDepreciation expense for March =$7,300

Total General and administrative expenses for each month is calculated as under-

Total General and administrative expenses= Depreciationexpense+General and administrative salaries +Maintenance Expense Total General and administrative expenses for January=$6,000+$12,000+$2,000Total General and administrative expenses for January=$20,000 Total General and administrative expenses for February=$7,000+$12,000+$2,000 Total General and administrative expenses for February=$21,000 Total General and administrative expenses for March=$7,300+$12,000+$2,000 Total General and administrative expenses for March=$21,300

Conclusion:

Thus, the general and administrative expenses budget is prepared for the month of January, February and March.

Answer 34

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 5-

To prepare:

Monthly capital expenditures Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Capital Expenditures budget

	January	February	March	Quarter
Purchase of Equipment	36,000	96,000	28,800	160,800
Purchase of Land	0	0	150,000	150,000
Total Capital expenditure	36,000	96,000	178,800	310,800

Explanation of Solution

Given-

Purchase of Equipment in January = $36,000
Purchase of Equipment in February = $96,000
Purchase of Equipment in March = $28,800
Purchase of Land in March = $150,000

Total capital expenditure in March= Purchase of Equipment+ Purchase of LandTotal capital expenditure in March=$28,800 + $150,000Total capital expenditure in March=$178,800

Conclusion:

Thus, Capital expenditure budget is prepared.

Answer 35

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 5-

To prepare:

Monthly capital expenditures Budget

Answer 36

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Capital Expenditures budget

	January	February	March	Quarter
Purchase of Equipment	36,000	96,000	28,800	160,800
Purchase of Land	0	0	150,000	150,000
Total Capital expenditure	36,000	96,000	178,800	310,800

Answer 37

Expert Solution

Answer 38

Expert Solution

Answer 39

Expert Solution

Answer 40

Explanation of Solution

Given-

Purchase of Equipment in January = $36,000
Purchase of Equipment in February = $96,000
Purchase of Equipment in March = $28,800
Purchase of Land in March = $150,000

Total capital expenditure in March= Purchase of Equipment+ Purchase of LandTotal capital expenditure in March=$28,800 + $150,000Total capital expenditure in March=$178,800

Conclusion:

Thus, Capital expenditure budget is prepared.

Answer 41

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 6-

To prepare:

Monthly Cash Budget

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly cash budgets

	January	February	March
Beginning cash balance	36,000	30,100	210,300
Cash receipts:
Cash sales	96,250	123,750	151,250
Collection from -
Beginning accounts receivable	125,000	400,000
Credit sales of January		173,250	115,500
Credit sales of February			222,750
Total cash receipts	221,250	697,000	489,500
Total cash available	257,250	727,100	699,800
Less: Cash disbursements-
Merchandise purchases
Beginning accounts payable	80,000	280,000
January accounts payable		22,800	91,200
February accounts payable			56,400
Selling expenses (Req.3)	82,000	104,000	126,000
General and administrative expenses excluding depreciation (Req.4)	14,000	14,000	14,000
Capital Expenditure (Req.5)	36,000	96,000	178,800
Interest on bank loan	150
Total cash disbursements	212,150	516,800	466,400
Surplus/ ( deficiency) of cash	45,100	210,300	233,400
Borrowing / ( Repayment)	(15,000)
Ending cash balance	30,100	210,300	233,400

Explanation of Solution

Cash sales is calculated as under-

Cash sales = 25% ×Total sales of the month Cash sales for January=25%×$385,000 Cash sales for January=$96,250 Cash sales for February=25%×$495,000 Cash sales for February=$123,750 Cash sales for March=25%×$605,000Cash sales for March=$151,250

Beginning accounts receivable-

Given-

January-$125,000
February-$400,000

Credit Sales-

For the month of February-

Credit sale receipt in the month of February=60%×January Credit salesCredit sale receipt in the month of February=60%×[Total January sales ×75%]Credit sale receipt in the month of February=60%×[$385,000×75%]Credit sale receipt in the month of February=60%×$288,750Credit sale receipt in the month of February=$173,250

For the month of March-

Credit sale receipt ={40%×January Credit sales}+{60%×February Credit sales} Credit sale receipt ={40%×[Total January sales ×75%]}+{60%×[Total February sales ×75%]} Credit sale receipt ={40%×[$385,000×75%]}+{60%×[$495,000×75%]} Credit sale receipt ={40%×$288,750}+{60%×$371,250} Credit sale receipt =$115,500+$222,750Credit sale receipt =$338,250

Beginning accounts payable-

Given-

January-$80,000
February-$280,000

Calculation of accounts payable is as under-

For the month of February-

Accounts payable=20%×January purchases Accounts payable=20%×$114,000Accounts payable=$22,800

For the month of March-

Accounts payable=( 80%×January purchases)+( 20%×February purchases)Accounts payable=( 80%×$114,000)+( 20%×$282,000)Accounts payable=$91,200+$56,400Accounts payable=$147,600

Total cash available is calculated as under-

Total cash available = Beginning cash balance + Total cash receipts Total cash available for January =$36,000+221,250 Total cash available for January =$257,250 Total cash available for February =$30,100+$697,000 Total cash available for February =$727,100 Total cash available for March =$210,300+$489,500Total cash available for March =$699,800

Surplus of cash-

Surplus of cash = Total cash available – Total Cash disbursements Surplus of cash for January = $257,250−$212,150 Surplus of cash for January =$45,100 Surplus of cash for February =$727,100−$516,800 Surplus of cash for February =$210,300 Surplus of cash for March =$699,800−$466,400Surplus of cash for March =$233,400

Interest on bank loan = $15,000×1% = $150

Conclusion:

Thus, Cash budget is prepared.

Answer 42

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 6-

To prepare:

Monthly Cash Budget

Answer 43

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Monthly cash budgets

	January	February	March
Beginning cash balance	36,000	30,100	210,300
Cash receipts:
Cash sales	96,250	123,750	151,250
Collection from -
Beginning accounts receivable	125,000	400,000
Credit sales of January		173,250	115,500
Credit sales of February			222,750
Total cash receipts	221,250	697,000	489,500
Total cash available	257,250	727,100	699,800
Less: Cash disbursements-
Merchandise purchases
Beginning accounts payable	80,000	280,000
January accounts payable		22,800	91,200
February accounts payable			56,400
Selling expenses (Req.3)	82,000	104,000	126,000
General and administrative expenses excluding depreciation (Req.4)	14,000	14,000	14,000
Capital Expenditure (Req.5)	36,000	96,000	178,800
Interest on bank loan	150
Total cash disbursements	212,150	516,800	466,400
Surplus/ ( deficiency) of cash	45,100	210,300	233,400
Borrowing / ( Repayment)	(15,000)
Ending cash balance	30,100	210,300	233,400

Answer 44

Expert Solution

Answer 45

Expert Solution

Answer 46

Expert Solution

Answer 47

Explanation of Solution

Cash sales is calculated as under-

Cash sales = 25% ×Total sales of the month Cash sales for January=25%×$385,000 Cash sales for January=$96,250 Cash sales for February=25%×$495,000 Cash sales for February=$123,750 Cash sales for March=25%×$605,000Cash sales for March=$151,250

Beginning accounts receivable-

Given-

January-$125,000
February-$400,000

Credit Sales-

For the month of February-

Credit sale receipt in the month of February=60%×January Credit salesCredit sale receipt in the month of February=60%×[Total January sales ×75%]Credit sale receipt in the month of February=60%×[$385,000×75%]Credit sale receipt in the month of February=60%×$288,750Credit sale receipt in the month of February=$173,250

For the month of March-

Credit sale receipt ={40%×January Credit sales}+{60%×February Credit sales} Credit sale receipt ={40%×[Total January sales ×75%]}+{60%×[Total February sales ×75%]} Credit sale receipt ={40%×[$385,000×75%]}+{60%×[$495,000×75%]} Credit sale receipt ={40%×$288,750}+{60%×$371,250} Credit sale receipt =$115,500+$222,750Credit sale receipt =$338,250

Beginning accounts payable-

Given-

January-$80,000
February-$280,000

Calculation of accounts payable is as under-

For the month of February-

Accounts payable=20%×January purchases Accounts payable=20%×$114,000Accounts payable=$22,800

For the month of March-

Accounts payable=( 80%×January purchases)+( 20%×February purchases)Accounts payable=( 80%×$114,000)+( 20%×$282,000)Accounts payable=$91,200+$56,400Accounts payable=$147,600

Total cash available is calculated as under-

Total cash available = Beginning cash balance + Total cash receipts Total cash available for January =$36,000+221,250 Total cash available for January =$257,250 Total cash available for February =$30,100+$697,000 Total cash available for February =$727,100 Total cash available for March =$210,300+$489,500Total cash available for March =$699,800

Surplus of cash-

Surplus of cash = Total cash available – Total Cash disbursements Surplus of cash for January = $257,250−$212,150 Surplus of cash for January =$45,100 Surplus of cash for February =$727,100−$516,800 Surplus of cash for February =$210,300 Surplus of cash for March =$699,800−$466,400Surplus of cash for March =$233,400

Interest on bank loan = $15,000×1% = $150

Conclusion:

Thus, Cash budget is prepared.

Answer 48

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 7-

To prepare:

Budgeted income statement

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Income Statement

Particulars	Amount ($)	Amount ($)
Sales (Req.1)		1,485,000
Cost of merchandise sold		810,000
Gross Profit		675,000
Operating expenses:
Selling expenses (Req.3)	312,000
General and administrative expenses (Req.4)	62,300
Interest on bank loan	150	374,450
Income before tax		300,550
Tax @ 40%		120,220
Net operating income		180,330

Explanation of Solution

Cost of merchandise sold-

Cost of merchandise sold = No. of units ×Cost priceCost of merchandise sold =27,000×$30Cost of merchandise sold =$810,000

Gross profit is calculated as under-

Gross profit = Sales – Cost of merchandise soldGross profit =$1,485,000−$810,000Gross profit =$675,000

Interest Expense-

Interest on bank loan = $15,000×1% = $150

Income before tax-

Income before tax= Sales−Cost of goods sold−Selling Expense −General and administrative expenses− Interest expenseIncome before tax=$1,485,000−$810,000−$312,000−$62,300−$150Income before tax=$300,550

Tax Expense-

Tax Expense=Income before tax×Tax RateTax Expense=$300,550×40%Tax Expense=$120,220

Net Operating income is calculated as under-

Net Operating income= Income before tax−Tax ExpenseNet Operating income=$300,550−$120,220Net Operating income=$180,330

Conclusion:

Thus, Income statement is prepared for the quarter.

Answer 49

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 7-

To prepare:

Budgeted income statement

Answer 50

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Income Statement

Particulars	Amount ($)	Amount ($)
Sales (Req.1)		1,485,000
Cost of merchandise sold		810,000
Gross Profit		675,000
Operating expenses:
Selling expenses (Req.3)	312,000
General and administrative expenses (Req.4)	62,300
Interest on bank loan	150	374,450
Income before tax		300,550
Tax @ 40%		120,220
Net operating income		180,330

Answer 51

Expert Solution

Answer 52

Expert Solution

Answer 53

Expert Solution

Answer 54

Explanation of Solution

Cost of merchandise sold-

Cost of merchandise sold = No. of units ×Cost priceCost of merchandise sold =27,000×$30Cost of merchandise sold =$810,000

Gross profit is calculated as under-

Gross profit = Sales – Cost of merchandise soldGross profit =$1,485,000−$810,000Gross profit =$675,000

Interest Expense-

Interest on bank loan = $15,000×1% = $150

Income before tax-

Income before tax= Sales−Cost of goods sold−Selling Expense −General and administrative expenses− Interest expenseIncome before tax=$1,485,000−$810,000−$312,000−$62,300−$150Income before tax=$300,550

Tax Expense-

Tax Expense=Income before tax×Tax RateTax Expense=$300,550×40%Tax Expense=$120,220

Net Operating income is calculated as under-

Net Operating income= Income before tax−Tax ExpenseNet Operating income=$300,550−$120,220Net Operating income=$180,330

Conclusion:

Thus, Income statement is prepared for the quarter.

Answer 55

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 8-

To prepare:

Budgeted Balance sheet.

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Balance sheet as of March 31, 2020

	Amount ($)	Amount ($)
Assets
Cash	233,400
Accounts receivable	602,250
Inventory	60,000
Total current assets		895,650
Land		150,000
Equipment gross	610,800
Accumulated depreciation	(87,800)
Equipment net		523,000
Total assets		1,568,650
Stockholder's Equity and Liabilities
Accounts payable	549,600
Tax payable	120,220
Current liabilities		669,820
Common stock		472,500
Retained earnings		426,330
Total Stockholder's Equity and Liabilities		1,568,650

Explanation of Solution

Assets

Given,

Land = $150,000 (from Requirement 5)

Cash = $233,400 (from Requirement 6)

Calculation of total current assets is as under-

Current assets= Cash + Accounts receivable+Inventory Current assets=$233,400+$602,250+$60,000Current assets=$895,650

Accumulated Depreciation-

Accumulated depreciation=Beginning Accumulated depreciation+Depreciation expenses Accumulated depreciation=$67,500+$20,300Accumulated depreciation=$87,800

Equipment-

Equipment =Equipment gross−Accumulated Depreciation Equipment =$610,800−$87,800Equipment =$523,000

Calculation of total assets is as under-

Total Assets=Total Current assets+Land+Equipment Total Assets=$895,650+$150,000+$523,000Total Assets=$1,568,650

Total Stockholder's Equity and Liabilities Given,

Taxes payable = 120,220 (from requirement 7)

Common stock = $472,500

Accounts payable-$549,600

Calculation of Current liabilities is as under-

Current liabilities=Accounts payable+Taxes payableCurrent liabilities=$549,600+$120,220Current liabilities= $669,820

Retained earnings-

Retained earnings = Beginning retained earnings + Net IncomeRetained earnings =$246,000+$180,330Retained earnings =$426,330

Calculation of Total Stockholder's Equity and Liabilities is as under-

Total Stockholder's Equity and Liabilities=Current liabilities+Common stock+ Retained earnings Total Stockholder's Equity and Liabilities=$669,820+$472,500+$426,330Total Stockholder's Equity and Liabilities=$1,568,650

Conclusion:

Thus, Budgeted balance sheet is prepared with total of $1,568,650.

Answer 56

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 8-

To prepare:

Budgeted Balance sheet.

Answer 57

Expert Solution

Answer to Problem 8APSA

DIMSDALE SPORTS COMPANY
Balance sheet as of March 31, 2020

	Amount ($)	Amount ($)
Assets
Cash	233,400
Accounts receivable	602,250
Inventory	60,000
Total current assets		895,650
Land		150,000
Equipment gross	610,800
Accumulated depreciation	(87,800)
Equipment net		523,000
Total assets		1,568,650
Stockholder's Equity and Liabilities
Accounts payable	549,600
Tax payable	120,220
Current liabilities		669,820
Common stock		472,500
Retained earnings		426,330
Total Stockholder's Equity and Liabilities		1,568,650

Answer 58

Expert Solution

Answer 59

Expert Solution

Answer 60

Expert Solution

Answer 61

Explanation of Solution

Assets

Given,

Land = $150,000 (from Requirement 5)

Cash = $233,400 (from Requirement 6)

Calculation of total current assets is as under-

Current assets= Cash + Accounts receivable+Inventory Current assets=$233,400+$602,250+$60,000Current assets=$895,650

Accumulated Depreciation-

Accumulated depreciation=Beginning Accumulated depreciation+Depreciation expenses Accumulated depreciation=$67,500+$20,300Accumulated depreciation=$87,800

Equipment-

Equipment =Equipment gross−Accumulated Depreciation Equipment =$610,800−$87,800Equipment =$523,000

Calculation of total assets is as under-

Total Assets=Total Current assets+Land+Equipment Total Assets=$895,650+$150,000+$523,000Total Assets=$1,568,650

Total Stockholder's Equity and Liabilities Given,

Taxes payable = 120,220 (from requirement 7)

Common stock = $472,500

Accounts payable-$549,600

Calculation of Current liabilities is as under-

Current liabilities=Accounts payable+Taxes payableCurrent liabilities=$549,600+$120,220Current liabilities= $669,820

Retained earnings-

Retained earnings = Beginning retained earnings + Net IncomeRetained earnings =$246,000+$180,330Retained earnings =$426,330

Calculation of Total Stockholder's Equity and Liabilities is as under-

Total Stockholder's Equity and Liabilities=Current liabilities+Common stock+ Retained earnings Total Stockholder's Equity and Liabilities=$669,820+$472,500+$426,330Total Stockholder's Equity and Liabilities=$1,568,650