Concept explainers
1.
the value of the collection in the month of July, August, September and October
Introduction: Budget is the evaluation of the revenue and the expense which is expected incur in the specified period.
1.
Explanation of Solution
Total cash collection of the July August, September and December are $209,500, 217,500, 226,500 and $227,000.
Calculate the expected cash collection,
Particulars | July | August | September | October |
Sales | 210,000 | 230,000 | 220,000 | 240,000 |
Collection | ||||
35% in month of sales | 73,500 | 80,500 | 77,000 | 84,000 |
65% in the month of following | 0 | 136,500 | 149,500 | 143,000 |
Collection from | 136,000 | 0 | 0 | 0 |
Total cash collection | 209,500 | 217,000 | 226,500 | 227,000 |
2.
a.
the value of the merchandise purchase for the quarter ended September
Introduction: Budget is the evaluation of the revenue and the expense which is expected incur in the specified period.
2.
a.
Explanation of Solution
Formula to calculate the merchandise purchase for the quarter ended September,
Substitute, $41,400 for the closing inventory July, $39,600 for the closing inventory of August and $43,200 for the September
Working notes:
Calculation of merchandise purchase budget
Particulars | July | August | September | October |
Sales | 210,000 | 230,000 | 220,000 | 240,000 |
Cost of goods sold (60%) | 126,000 | 138,000 | 132,000 | 144,000 |
Less: Opening inventory | 62,000 | 41,400 | 39,600 | |
Add: closing inventory(30% of the next month cost of goods sold) | 41,400 | 39,600 | 43,200 | |
b.
The value of the merchandise purchases
Introduction: Budget is the evaluation of the revenue and the expense which is expected incur in the specified period.
b.
Explanation of Solution
Formula to calculate total cash disbursement for merchandise purchase for the quarter ended September,
Substitute, $113,200 for merchandise purchase in month July, $117,200for merchandise purchase in month of August and $135,800 for merchandise purchase in month September
Working notes:
Particulars | July | August | September |
Purchases | 105,400 | 136,200 | 135,200 |
Cash payment (40%) | $42,160 | $54,480 | 54,080 |
60% on the following month | 0 | 63,240 | 81,720 |
Payment of account payable in month of July | 71,100 | 0 | 0 |
Total | 113,260 | 117,720 | 135,800 |
Calculate the purchase in the month of July,
Calculate the purchase in the month of August,
Calculate the purchase in the month of September,
3.
To prepare: Income statement of the company
Introduction: Budget is the evaluation of the revenue and the expense which is expected incur in the specified period.
3.
Explanation of Solution
Particulars | JulyAmount ($) | AugustAmount ($) | September Amount ($) |
Sales | 210,000 | 230,000 | 220,000 |
Cost of goods sold (60%) | 126,000 | 138,000 | 132,000 |
Gross profit | 84,000 | 92,000 | 88,000 |
Less: Selling & Administration expense | (60,000) | (60,000) | (60,000) |
Less: | (5,000) | (5,000) | (5,000) |
Less: remaining expense | (55,000) | (55,000) | (55,000) |
Net | (36,000) | (28,000) | (32,000) |
4.
To Prepare: Balance sheet of the company
Introduction: Budget is the evaluation of the revenue and the expense which is expected incur in the specified period.
4.
Explanation of Solution
Balance sheetas on September 31 | |
Assets: | Amount
($) |
Cash | 226,500 |
Account receivable | 143,000 |
Inventory | 62,000 |
Plant and equipment, net of depreciation | 132,000 |
Total assets | 563,500 |
Liability and stockholder’ equity | |
Account payable | 232,600 |
Common stock | 327,000 |
3,900 | |
Total liabilities and stockholder’s equity | 563,500 |
Working notes:
Calculate the retained earnings,
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Chapter 8 Solutions
GEN COMBO LOOSELEAF INTRODUCTION TO MANAGERIAL ACCOUNTING; CONNECT AC
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