Concept explainers
1.
Budgeting is a process to prepare the financial statement by the manager to estimate the organization’s future actions. It is also helpful to satisfy the everyday activities.
To Prepare: The
1.
Explanation of Solution
Prepare the budgeted income statement of Company M.
Company M | ||
Budgeted Income Statement | ||
For the Month Ending December 31, 2017 | ||
Particulars | Amount ($) | Amount ($) |
Revenue from sales (3,800 × $120) | 456,000 | |
Less: Cost of goods sold | ||
Direct materials (3,800 × $30) | 114,000 | |
Direct labor (3,800 × $8,40) | 31,920 | |
Factory overhead [(3,800 × $4.80) +$4,000+$1,400] |
23,640 | |
Cost of goods sold | (169,560) | |
Gross profit | 286,440 | |
Operating expenses: | ||
Selling expenses: | ||
Sales salaries and commissions [(3,800 × $13.50) + 12,800] |
64,100 | |
Advertising | 13,200 | |
Miscellaneous selling expense [(3,800 × $2.50) + 1,000] |
10,500 | |
Total selling expenses | 87,800 | |
Administrative expenses: | ||
Office and officers’ salaries [(3,800 × $7.00) + 7,800] |
34,400 | |
Supplies [(3,800 × $1.20) + 500] | 5,060 | |
Miscellaneous administrative expense [(3,800 × $2.40) + $400] |
9,520 | |
Total administrative expenses | 48,980 | |
Total operating expenses | (136,780) | |
Income before income tax | 149,660 | |
Income tax expense (30%) | (35,000) | |
Net Income | 114,660 |
Table (1)
2.
To Prepare: The budgeted
2.
Explanation of Solution
Prepare the budgeted balance sheet of Company M.
M Company Budgeted Balance Sheet December 31, 2017 |
|||
Particulars | Amount ($) | Amount ($) | Amount ($) |
Assets | |||
Current assets: | |||
Cash (Refer Table 3) | 106,660 | ||
Accounts receivable | 23,800 | ||
Inventories: | |||
Finished goods | 16,900 | ||
Work in process | 4,200 | ||
Materials | 6,400 | 27,500 | |
Prepaid expenses | 600 | ||
Total current assets | 158,560 | ||
Property, plant, and equipment: | |||
Plant and equipment | 104,000 (1) | ||
Less: |
36,000 (2) |
68,000 | |
Total Assets | 226,560 | ||
Liabilities | |||
Current liabilities: | |||
Accounts payable | 14,800 | ||
Total Liabilities | 14,800 | ||
Common stock | 30,000 | ||
Retained earnings (Refer Table 4) | 181,760 | ||
Total Stockholders’ Equity | 211,760 | ||
Total liabilities and stockholders’ equity | 226,560 |
Table (2)
Working Note:
Calculate the cash balance.
Particulars | Amount ($) | Amount ($) |
Balance, January 1, 2017 | 26,000 | |
Add: Cash from operations | ||
Net income | 114,660 | |
Depreciation of plant and equipment | 4,000 | 118,660 |
Less: Dividends to be paid in 2017 [$20,000 × $0.20 × 4 qtrs.] |
16,000 | |
Plant and equipment to be acquired in 2017 | 22,000 | (38,000) |
Cash balance, December 31, 2017 | 106,660 |
Table (3)
Calculate the amount of plant and equipment.
Calculate the amount of accumulated depreciation.
Calculate the retained earnings balance.
Particulars | Amount ($) |
Balance, January 1, 2017 | 83,100 |
Add: Net income | 114,660 |
Less: Dividends to be paid in 2017 [$20,000 × $0.20 × 4 qtrs.] |
(16,000) |
Balance, December 31, 2017 | 181,760 |
Table (4)
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Chapter 21 Solutions
FINANCIAL AND MANAGERIAL ACCOUNTING
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- Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning