MANAG ACCT F/..(LL)+CONNECT W/PROCTORIO+
MANAG ACCT F/..(LL)+CONNECT W/PROCTORIO+
5th Edition
ISBN: 9781266018183
Author: Noreen
Publisher: MCG
Question
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Chapter 8, Problem 8.31P

1

To determine

Compute the expected cash collections.

Introduction: Budget means the estimation made for the usage of money to decide the amount that executor will need to execute the plan. The budgeting process refers to the process in which future business activity is planned for preparing the way of performing goals by mapping the formal plan.

1

Expert Solution
Check Mark

Answer to Problem 8.31P

The expected cash collection made from January is $304,000, February is $440,000, March is $540,000, and quarter is $1,284,000.

Explanation of Solution

Compute expected cash collection.

    ParticularsJanuaryFebruaryMarchQuarter
    Cash sales$80,000$120,000$60,000$260,000
    Credit sales$224,000$320,000$480,000$1,024,000
    Total cash collectible$304,000$440,000$540,000$1,284,000

2

To determine

Compute merchandise purchase budget and expected cash disbursements for merchandise purchase.

Introduction: Budget means the estimation made for the usage of money to decide the amount that executor will need to execute the plan. The budgeting process refers to the process in which future business activity is planned for preparing the way of performing goals by mapping the formal plan.

2

Expert Solution
Check Mark

Answer to Problem 8.31P

The merchandise purchase budget for January is $270,000, February is $315,000, and March is $165,000 and $750,000 and expected cash disbursement for January is $228,000, February is $292,500, March is $240,000 and Quarter is $760,500.

Explanation of Solution

  1. Merchandise purchase budget
    • ParticularsJanuaryFebruaryMarch Quarter
      Budgeted cost of goods sold$240,000$360,000$180,000$780,000
      Add:
      Desired ending merchandise inventory$90,000$45,000$30,000$30,000
      Total needs$330,000$405,000$210,000$810,000
      Less: Beginning inventory $60,000$90,000$45,000$60,000
      Required purchases$270,000$315,000$165,000$750,000
  2. Expected cash disbursements for merchandise purchases:
    ParticularsJanuary (in $)February (in $)March (in $) Quarter (in $)
    December purchases93,00093,000
    January purchase135,000135,000270,000
    February purchase157,000157,000315,000
    March purchase82,50082,500
    Total cash disbursements for purchases228,000292,500240,000760,500

3

To determine

Compute the cash budget table.

Introduction: Budget means the estimation made for the usage of money to decide the amount that executor will need to execute the plan. The budgeting process refers to the process in which future business activity is planned for preparing the way of performing goals by mapping the formal plan.

3

Expert Solution
Check Mark

Answer to Problem 8.31P

The cash budget table has ending cash balance on January of $30,000, February of $30,800, March of $42,900, and Quarter of $42,900.

Explanation of Solution

    ParticularsJanuary (in $)February (in $)March (in $)Quarter (in $)
    Beginning cash balance48,00030,00030,80048,000
    Add: Collections from customers304,000440,000540,0001,284,000
    Total Cash available352,000470,000570,8001,332,000
    Less: Cash disbursements:
    Inventory purchases228,000292,500240,000760,500
    Selling and administrative expenses129,000145,000121,000395,000
    Equipment purchase01,70084,50086,200
    Cash dividends45,0000045,000
    Total cash disbursements 402,000439,200445,5001,286,700
    Excess of cash over disbursements(50,000)30,800125,30045,300
    Financing:
    Borrowings 80,0000080,000
    Repayments00(80,000)(80,000)
    Interest ($80,000×1%×3)00(2,400)(2,400)
    Total financing 80,0000(82,400)(2,400)
    Ending cash balance30,00030,80042,90042,900

4

To determine

Prepare absorption costing income statements.

Introduction: Budget means the estimation made for the usage of money to decide the amount that executor will need to execute the plan. The budgeting process refers to the process in which future business activity is planned for preparing the way of performing goals by mapping the formal plan.

4

Expert Solution
Check Mark

Answer to Problem 8.31P

Income statement shows net income of $80,600.

Explanation of Solution

Computation of Income Statements:

    ParticularsAmountAmount
    Sales$1,300,00
    Cost of goods sold:
    Beginning inventory$60,000
    Purchases$750,000
    Goods available for sales$810,000
    Ending inventory$30,000$780,000
    Gross margin$520,000
    Selling and Administrative expenses:
    Salaries and wages$81,000
    Advertising $210,000
    Shipping (5% of sales)$65,000
    Depreciation$42,000
    Other expenses (3% on sales)$39,000$437,000
    Net operating income $83,000
    Less: Interest Expenses$2,400
    Net income$80,600

Working notes:

Salary and wages

  Total salaries and wages= Salaries and wages× Number of monthsTotal salaries and wages= $27,000×3Total salaries and wages= $81,000

Advertising

  Total advertising expenses = Advertising × Number of months

  Total advertising expenses = $70,000× 3

  Total advertising expenses = $210,000

5

To determine

Prepare balance sheet as of March 31.

Introduction: Budget means the estimation made for the usage of money to decide the amount that executor will need to execute the plan. The budgeting process refers to the process in which future business activity is planned for preparing the way of performing goals by mapping the formal plan.

5

Expert Solution
Check Mark

Answer to Problem 8.31P

Balance sheet has balance of assets and liabilities of $727,100

Explanation of Solution

    ParticularsAmount (in $)Amount (in $)
    Assets
    Current Assets:
    Cash$42,900
    Accounts receivable ($300,000×80%)240,000
    Inventory30,000
    Total current asset312,900
    Building and equipment414,200
    Total asset727,100
    Liabilities and stockholder’s equity
    Current liabilities
    Accounts payable ($165,000×50%)82,500
    Stockholder’s equity:
    Common stock500,000
    Retained earning 144,600644,600
    Total liabilities and stockholder’s equity727,100

Working notes:

Retained earning

    ParticularsAmount (in $)
    Beginning retained earnings109,000
    Add: Net income80,600
    Total189,600
    Less: Cash dividends45,000
    Ending retained earning144,600

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