Concept explainers
Comprehensive Problem for Chapters 22-24
The Trolley Toy Company manufactures toy building block sets for children Trolley is planning for 2019 by developing a
TROLLEY TOY COMPANY Balance Sheet December 31, 2018 |
||
Assets | ||
Current Assets: | ||
Cash $ |
58,000 | |
Accounts Receivable | 22,000 | |
Raw Materials Inventory | 1,200 | |
Finished Goods Inventory | 5,400 | |
Total Current Assets | $ 86,600 | |
Property, Plant, and Equipment: | ||
Equipment | 142,000 | |
Less: |
(47,000) | 95,000 |
Total Assets | $ 181,600 | |
Liabilities | ||
Current Liabilities: | ||
Accounts Payable | $ 8,000 | |
Common Stock, no par $ 120,000 |
||
53,600 | ||
Total Stockholders' Equity | 173,600 | |
Total Liabilities and Stockholders' Equity | $ 181,600 |
Other budget data for Trolley Toy Company:
- Budgeted sales are 1,400 sets for the first quarter and expected to increase by 150 sets per quarter. Cash sales are expected to be 30% of total sales, with the remaining 70% of sales on account. Sets are budgeted to sell for $90 per set.
- Finished Goods Inventory on December 31,2018, consists of 200 sets at $27 each.
- Desired ending Finished Goods Inventory is 40% of the next quarter's sales; first quarter sales for 2020 are expected to be 2,000 sets. FIFO inventory costing method is used.
- Raw Materials Inventory on December 31,2018, consists of 600 pounds. Direct materials requirement is 3 pounds per set. The cost is $2 per pound.
- Desired ending Raw Materials Inventory is 10% of the next quarter's direct materials needed for production; desired ending inventory for December 31, 2019, is 600 pounds; indirect materials are insignificant and not considered for budgeting purposes.
- Each set requires 0.30 hours of direct labor; direct labor costs average $12 per hour.
- Variable manufacturing overhead is $3.60 per set.
- Fixed manufacturing overhead includes $7,000 per quarter in depreciation and $2,585 per quarter for other costs, such as utilities, insurance, and property taxes.
- Fixed selling and administrative expenses include $11,000 per quarter for salaries; $1,500 per quarter for rent; $1,350 per quarter for insurance; and $1,500 per quarter for depreciation.
- Variable selling and administrative expenses include supplies at 2% of sales.
- Capital expenditures include $45,000 for new manufacturing equipment, to be purchased and paid for in the first quarter.
- Cash receipts for sales on account are 40% in the quarter of the sale and 60% in the quarter following the sale; Accounts Receivable balance on December 31,2018, is expected to be received in the first quarter of 2019; uncollectible accounts are considered insignificant and not considered for budgeting purposes.
Requirements
1. Prepare Trolley's operating budget and
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Horngren's Accounting: The Managerial Chapters (12th Edition) (loose Leaf Version)
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