Chapter 20, Problem 4PSA

1.

To determine

To prepare:

The sales budget of Z manufacturing.

Explanation of Solution

Prepare the sales budget as shown below.

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

Table - 1

2.

To determine

To prepare:

The production budget of Z manufacturing.

Explanation of Solution

Prepare the production budget as shown below.

Table - 2

3.

To determine

To prepare:

The raw materials budget of Z manufacturing.

Explanation of Solution

Prepare the raw material budget of Z manufacturing as shown below

Table - 3

4.

To determine

To prepare:

The direct labor budget of Z manufacturing.

Explanation of Solution

Prepare the direct labor budget of Z manufacturing as shown below.

Table - 4

5.

To determine

To prepare:

The factory overhead budget of Z manufacturing.

Explanation of Solution

Prepare the factory overhead budget of Z manufacturing as shown below.

Table - 5

6.

To determine

To prepare:

The selling expense budget of Z manufacturing.

Explanation of Solution

Prepare the selling expense budget of Z manufacturing as shown below.

Table - 6

7.

To determine

To prepare:

The general and administrative expense budget of Z manufacturing.

Explanation of Solution

Prepare the general and administrative expense budget of Z manufacturing as shown below.

Table - 7

8.

To determine

To prepare:

The cash budget of Z manufacturing.

Explanation of Solution

Prepare the cash budget of Z manufacturing as shown below.

Table - 8

Working notes:

Calculate the cash receipts.

Table - 9

9.

To determine

To prepare:

The budgeted income statement for the second quarter.

Explanation of Solution

Prepare the budgeted income statement as shown below.

Z. Manufacturing
Income Statement
For three months ended June 30, 2015
Particulars	Amount ($)	Amount ($)
Sales		1,431,000
Less: Cost of goods sold		1,191,000
Gross profit		240,000
Less: Operating expenses
Sales commission	114,480
Sales salaries	9000
General administrative salary	36000
Total operating expense		159,480
Earnings before interest and taxes		80,520
Less: Interest on long term notes		13,500
Interest on short term note		120
Earnings before taxes (A)		66,900
Less: Income tax $\left(\text{A}\times 35\%\right)$		23,415
Net income		43,485

Table - 10

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

10.

To determine

To prepare:

The budgeted balance sheet for the second quarter.

Explanation of Solution

Prepare the budgeted balance sheet as shown below.

Balance sheet
For three months ended June 30, 2015
Particulars		Amount ($)
Assets:
Cash	40,000
Account Receivables	333,900
Raw material inventory	80,000
Finished goods inventory	325,540
Total current assets		779,440
Equipment	730,000
Less: Accumulated depreciation	210,000
Net equipment		50,000
Total Assets		1,299,440
Liabilities and Stockholder’s Equity
Liabilities
Accounts Payable	182,000
Bank loan payable	16,752
Income tax payable	23,415
Total current liability		222,167
Long term payables		500,000
Total liabilities
Stockholder’s equity
Common Stock	335,000
Retained earnings	242,273
Total stockholders’ equity		577,273
Total Liabilities and Stockholder’s equity		1,299,440

Table - 11

Working notes:

Calculate the retained earnings

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

Conclusion

Hence, the total amount appearing in the balance sheet of Z Manufacturing as on June 30, 2015 is $1,299,440.