Chapter 20, Problem 4PSB

1.

To determine

To prepare:

The sales budget of N manufacturing.

Explanation of Solution

Prepare the sales budget as shown below.

Sales Budget
Particulars	July ($)	August ($)	September ($)	Total ($)
Sales unit (A)	21,000	19,000	20,000	60,000
Selling price per unit (B)	17	17	17	17
Total sales $\left(\text{A}\times \text{B}\right)$	357,000	323,000	340,000	1,020,000

Table - 1

2.

To determine

To prepare:

The production budget of N Manufacturing.

Explanation of Solution

Prepare the production budget as shown below.

Table - 2

3.

To determine

To prepare:

The raw materials budget of N Manufacturing.

Explanation of Solution

Prepare the raw materials budget of N Manufacturing as shown below.

Table - 3

4.

To determine

To prepare:

The direct labor budget of N Manufacturing.

Explanation of Solution

Prepare the direct labor budget of N Manufacturing as shown below.

Table - 4

5.

To determine

To prepare:

The factory overhead budget of N Manufacturing.

Explanation of Solution

Prepare the factory overhead budget of N Manufacturing as shown below.

Table - 5

6.

To determine

To prepare:

The selling expense budget of N Manufacturing.

Explanation of Solution

Prepare the selling expense budget of N Manufacturing as shown below.

Table - 6

7.

To determine

To prepare:

The general and administrative expense budget of N Manufacturing.

Explanation of Solution

Prepare the general and administrative expense budget of N Manufacturing as shown below.

Table - 7

8.

To determine

To prepare:

The cash budget of N Manufacturing.

Explanation of Solution

Prepare the cash budget as shown below.

Table - 8

Working note:

Calculate the cash receipts.

Table (9)

9.

To determine

To prepare:

The budgeted income statement for the third quarter.

Explanation of Solution

Prepare the budgeted income statement as shown below.

Income Statement
For three months ended September 30, 2015
Particulars	Amount ($)	Amount ($)
Sales		1,020,000
Less: Cost of goods sold		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, the budgeted net income of N Manufacturing is $7,254.

10.

To determine

To prepare:

The budgeted balance sheet for the third quarter.

Explanation of Solution

Prepare the balance sheet as shown below.

Balance sheet
For three months ended September 30, 2015
Particulars	Amount ($)	Amount ($)
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:

1. Calculate the retained earnings.

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

Conclusion

Hence, the total amount appearing in the balance sheet of N Manufacturing as on September 30, 2015 is $1,054,920.