1
Compute the expected cash collections.
Introduction: Budget means the estimation made for the usage of money to decide the amount that executor will need to execute the plan. The budgeting process refers to the process in which future business activity is planned for preparing the way of performing goals by mapping the formal plan.
1
Answer to Problem 8.31P
The expected cash collection made from January is $304,000, February is $440,000, March is $540,000, and quarter is $1,284,000.
Explanation of Solution
Compute expected cash collection.
Particulars | January | February | March | Quarter |
Cash sales | $80,000 | $120,000 | $60,000 | $260,000 |
Credit sales | $224,000 | $320,000 | $480,000 | $1,024,000 |
Total cash collectible | $304,000 | $440,000 | $540,000 | $1,284,000 |
2
Compute merchandise purchase budget and expected cash disbursements for merchandise purchase.
Introduction: Budget means the estimation made for the usage of money to decide the amount that executor will need to execute the plan. The budgeting process refers to the process in which future business activity is planned for preparing the way of performing goals by mapping the formal plan.
2
Answer to Problem 8.31P
The merchandise purchase budget for January is $270,000, February is $315,000, and March is $165,000 and $750,000 and expected cash disbursement for January is $228,000, February is $292,500, March is $240,000 and Quarter is $760,500.
Explanation of Solution
- Merchandise purchase budget
- Expected cash disbursements for merchandise purchases:
Particulars | January | February | March | Quarter |
Budgeted cost of goods sold | $240,000 | $360,000 | $180,000 | $780,000 |
Add: | ||||
Desired ending merchandise inventory | $90,000 | $45,000 | $30,000 | $30,000 |
Total needs | $330,000 | $405,000 | $210,000 | $810,000 |
Less: Beginning inventory | $60,000 | $90,000 | $45,000 | $60,000 |
Required purchases | $270,000 | $315,000 | $165,000 | $750,000 |
Particulars | January (in $) | February (in $) | March (in $) | Quarter (in $) |
December purchases | 93,000 | 93,000 | ||
January purchase | 135,000 | 135,000 | 270,000 | |
February purchase | 157,000 | 157,000 | 315,000 | |
March purchase | 82,500 | 82,500 | ||
Total cash disbursements for purchases | 228,000 | 292,500 | 240,000 | 760,500 |
3
Compute the
Introduction: Budget means the estimation made for the usage of money to decide the amount that executor will need to execute the plan. The budgeting process refers to the process in which future business activity is planned for preparing the way of performing goals by mapping the formal plan.
3
Answer to Problem 8.31P
The cash budget table has ending cash balance on January of $30,000, February of $30,800, March of $42,900, and Quarter of $42,900.
Explanation of Solution
Particulars | January (in $) | February (in $) | March (in $) | Quarter (in $) |
Beginning cash balance | 48,000 | 30,000 | 30,800 | 48,000 |
Add: Collections from customers | 304,000 | 440,000 | 540,000 | 1,284,000 |
Total Cash available | 352,000 | 470,000 | 570,800 | 1,332,000 |
Less: Cash disbursements: | ||||
Inventory purchases | 228,000 | 292,500 | 240,000 | 760,500 |
Selling and administrative expenses | 129,000 | 145,000 | 121,000 | 395,000 |
Equipment purchase | 0 | 1,700 | 84,500 | 86,200 |
Cash dividends | 45,000 | 0 | 0 | 45,000 |
Total cash disbursements | 402,000 | 439,200 | 445,500 | 1,286,700 |
Excess of cash over disbursements | (50,000) | 30,800 | 125,300 | 45,300 |
Financing: | ||||
Borrowings | 80,000 | 0 | 0 | 80,000 |
Repayments | 0 | 0 | (80,000) | (80,000) |
Interest | 0 | 0 | (2,400) | (2,400) |
Total financing | 80,000 | 0 | (82,400) | (2,400) |
Ending cash balance | 30,000 | 30,800 | 42,900 | 42,900 |
4
Prepare absorption costing income statements.
Introduction: Budget means the estimation made for the usage of money to decide the amount that executor will need to execute the plan. The budgeting process refers to the process in which future business activity is planned for preparing the way of performing goals by mapping the formal plan.
4
Answer to Problem 8.31P
Income statement shows net income of $80,600.
Explanation of Solution
Computation of Income Statements:
Particulars | Amount | Amount |
Sales | $1,300,00 | |
Cost of goods sold: | ||
Beginning inventory | $60,000 | |
Purchases | $750,000 | |
Goods available for sales | $810,000 | |
Ending inventory | $30,000 | $780,000 |
Gross margin | $520,000 | |
Selling and Administrative expenses: | ||
Salaries and wages | $81,000 | |
Advertising | $210,000 | |
Shipping (5% of sales) | $65,000 | |
$42,000 | ||
Other expenses (3% on sales) | $39,000 | $437,000 |
Net operating income | $83,000 | |
Less: Interest Expenses | $2,400 | |
Net income | $80,600 | |
Working notes:
Salary and wages
Advertising
5
Prepare
Introduction: Budget means the estimation made for the usage of money to decide the amount that executor will need to execute the plan. The budgeting process refers to the process in which future business activity is planned for preparing the way of performing goals by mapping the formal plan.
5
Answer to Problem 8.31P
Balance sheet has balance of assets and liabilities of $727,100
Explanation of Solution
Particulars | Amount (in $) | Amount (in $) |
Assets | ||
Current Assets: | ||
Cash | $42,900 | |
240,000 | ||
Inventory | 30,000 | |
Total current asset | 312,900 | |
Building and equipment | 414,200 | |
Total asset | 727,100 | |
Liabilities and | ||
Current liabilities | ||
Accounts payable | 82,500 | |
Stockholder’s equity: | ||
Common stock | 500,000 | |
Retained earning | 144,600 | 644,600 |
Total liabilities and stockholder’s equity | 727,100 |
Working notes:
Retained earning
Particulars | Amount (in $) |
Beginning | 109,000 |
Add: Net income | 80,600 |
Total | 189,600 |
Less: Cash dividends | 45,000 |
Ending retained earning | 144,600 |
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