Chapter 7, Problem 4PSB

2.

To determine

To prepare: Production budget of N manufacturing.

Explanation of Solution

Statement that shows the Production budget of N manufacturing

Table (2)

3.

To determine

To prepare: Raw material budget of N manufacturing.

Explanation of Solution

Statement that shows the raw material budget of N manufacturing

Table (3)

4.

To determine

To prepare: Direct labor budget of N manufacturing.

Explanation of Solution

Statement that shows the direct labor budget of N manufacturing

Table (4)

5.

To determine

To prepare: Factory overhead budget of N manufacturing.

Explanation of Solution

Statement that shows the factory overhead budget of N manufacturing

Table (5)

6.

To determine

To prepare: Selling expense budget of N manufacturing.

Explanation of Solution

Statement that shows the selling expense budget of N manufacturing

Table (6)

7.

To determine

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

Explanation of Solution

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

Table (7)

8.

To determine

To prepare: Cash budget of N manufacturing.

Explanation of Solution

Statement that shows the Cash budget of N manufacturing

Table (8)

Working note:

Table (9)

9.

To determine

To prepare: Budgeted income statement for the third quarter.

Explanation of Solution

Prepare income statement.

N. Manufacturing
Income Statement
For three months ended September 30,2017
Particulars	Amount ($)	Amount ($)
Sales		1,020,000
Less: Cost of goods sold $\left(60,000\text{ units}\times \$14.35\right)$		861,000
Gross profit		159,000
Less: Operating expenses
Sales commission	102,000
Sales salaries	10,500
General administrative salary	27,000
Total operating expense		139,500
Earnings before interest and taxes		19500
Less: Interest on long term notes		8100
Interest on short term note		240
Earnings before taxes (A)		11,160
Less: Income tax $\left(\text{A}\times 35\%\right)$		3,906
Net income		7,254
Table (10)

Thus, budgeted net income of N manufacturing is $7,254.

10.

To determine

To prepare: Budgeted balance sheet for the third quarter.

Explanation of Solution

Prepare balance sheet

N. Manufacturing
Balance sheet
For three months ended September 30,2017
Particulars		Amount ($)
Assets
Cash	40,000
Account Receivables	238,000
Raw material inventory	15,840
Finished goods inventory	241,080
Total current assets		534,920
Equipment	820,000
Less: Accumulated depreciation	300,000
Net equipment		520,000
Total Assets		1,054,920
Liabilities and Stockholder’s Equity
Liabilities
Accounts Payable	88,800
Bank loan payable	14,380
Income tax payable	3,906
Total current liability		107,086
Long term note payables		300,000
Total liabilities		407,086
Stockholder’s Equity
Common Stock	600,000
Retained earnings	47,834
Total stockholders’ equity		647,834
Total Liabilities and Stockholder’s equity		1,054,920
Table (11)

Working note:

Calculation of retained earnings,

$\begin{array}{c}\text{Closing retained earning}=\text{Opening retained earning}+\text{Net income}-\text{Dividend}\\ =\$60,580+\$7,254-\$20,000\\ =\$47,834\end{array}$

Hence, the total of the balance sheet of the N Manufacturing as on September 30, 2017 is of $1,054,920.