Fundamental Accounting Principles
Fundamental Accounting Principles
23rd Edition
ISBN: 9781259536359
Author: John J Wild, Ken Shaw Accounting Professor, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 22, Problem 4BPSB
To determine

1.

Introduction:

The master budget is the aggregation of all lower-level budgets produced by a company's various functional areas, such as budgeted financial statements, a cash forecast, a financing plan and so on.

To calculate:

To calculate the sales budget for July, August and September.

Expert Solution
Check Mark

Answer to Problem 4BPSB

Solution:

The table below shows the sales budget for July, August and September:

Particulars Amount ($)
July August September
Forecastedsales in units 21,000 19,000 20,000
(*) Selling price per unit $17 $17 $17
Budgeted sales 357,000 323,000 340,000

Explanation of Solution

The forecasted sales in units and the selling price per unit have been given. Thus, we have multiplied forecasted sales in units and the selling price per unit to obtain budgeted sales dollar amount respectively.

To determine

2.

Introduction:

The master budget is the aggregation of all lower-level budgets produced by a company's various functional areas, such as budgeted financial statements, a cash forecast, a financing plan and so on.

To calculate:

To calculate the production budget for July, August and September.

Expert Solution
Check Mark

Answer to Problem 4BPSB

Solution:

The table below shows the production budget for July, August and September:

Particulars Units
July August September
Forecasted sales in units 21,000 19,000 20,000
Add- Finished goods inventory at end of the month 13,300 14,000 16,800
Less- Finished goods inventory at beginning of the month 16,800 13,300 14,000
Production budget 17,500 19,700 22,800

Explanation of Solution

The production budget as calculated above is based on forecasted sales in units and the finished goods inventory positions as estimated and required by the management. Thus, we have added finished goods inventory required at the end and deducted finished goods inventory at the beginning from theforecasted sales, for each of the given month respectively.

To determine

3.

Introduction:

The master budget is the aggregation of all lower-level budgets produced by a company's various functional areas, such as budgeted financial statements, a cash forecast, a financing plan and so on.

To calculate:

To calculate the raw materials budget for July, August and September.

Expert Solution
Check Mark

Answer to Problem 4BPSB

Solution:

The table below shows the raw materials budget for July, August and September:

Particulars Units
July August September
Production budget of finished goods 17,500 19,700 22,800
(*) Raw material required in each finished unit 0.5 0.5 0.5
Raw materials used in production process 8,750 9,850 11,400
Add- Raw materials inventory at end of the month 1,970 2,280 1,980
Less- Raw materials inventory at beginning of the month 4,375 1,970 2,280
Raw materials purchases quantity 6,345 10,160 11,100
(*) Raw materials cost per unit $8 $8 $8
Raw materials purchases budget $50,760 $81,280 $88,800

Explanation of Solution

The raw materials purchases budget as calculated above is based on production quantity budget of finished goods, raw material required in each finished unit and raw materials inventory positions as estimated and required by the management. Thus, we have added raw materials inventory required at the end and deducted raw materials inventory at the beginning from the raw materials used in production process, for each of the given month respectively.

To determine

4.

Introduction:

The master budget is the aggregation of all lower-level budgets produced by a company's various functional areas, such as budgeted financial statements, a cash forecast, a financing plan and so on.

To calculate:

To calculate the direct labor budget for July, August and September.

Expert Solution
Check Mark

Answer to Problem 4BPSB

Solution:

The table below shows the direct labor budget for July, August and September:

Particulars Units
July August September
Production budget of finished goods 17,500 19,700 22,800
(*) Direct labor requiredfor each finished unit 0.5 hours 0.5 hours 0.5 hours
Total direct labor hours required 8,750 9,850 11,400
(*) Direct labor cost per hour $16 $16 $16
Direct labor budget 140,000 157,600 182,400

Explanation of Solution

The direct labor budget as calculated above is based on production quantity budget of finished goods anddirect labor required for each finished unit. Thus, the total labor hours required is then multiplied with direct labor cost per hour to obtain direct labor budget respectively.

To determine

5.

Introduction:

The master budget is the aggregation of all lower-level budgets produced by a company's various functional areas, such as budgeted financial statements, a cash forecast, a financing plan and so on.

To calculate:

To calculate the factory overhead budget for July, August and September.

Expert Solution
Check Mark

Answer to Problem 4BPSB

Solution:

The table below shows the factory overhead budget for July, August and September:

Particulars Amount ($)
July August September
Total direct labor hours required 8,750 9,850 11,400
(*) Predetermined variable overhead rate is $2.70 per direct labor hour $2.70 $2.70 $2.70
Variable factory overhead budget 23,625 26,595 30,780
Fixed factory overheadbudget 20,000 20,000 20,000
Total factory overhead budget 43,625 46,595 50,780

Explanation of Solution

The factory overhead cost comprises of variable as well as fixed factory overhead cost. The same is calculated as shown above from the information provided. Also, the total labor hours required is multiplied with predetermined variable overhead rate which is $2.70 per direct labor hour to obtain variable factory overhead budget.

To determine

6.

Introduction:

The master budget is the aggregation of all lower-level budgets produced by a company's various functional areas, such as budgeted financial statements, a cash forecast, a financing plan and so on.

To calculate:

To calculate the selling expense budget for July, August and September.

Expert Solution
Check Mark

Answer to Problem 4BPSB

Solution:

The table below shows the selling expense budget for July, August and September:

Particulars Amount ($)
July August September
Sales representatives’ commissions 35,700 32,300 34,000
Add- Sales manager’s salary 3,500 3,500 3,500
Selling expense budget 39,200 35,800 37,500

Explanation of Solution

The selling expenses consists of sales representatives’ commissions and sales manager’s salary as calculated above. The sales representatives’ commissions are 10% of budgeted sales respectively.

To determine

7.

Introduction:

The master budget is the aggregation of all lower-level budgets produced by a company's various functional areas, such as budgeted financial statements, a cash forecast, a financing plan and so on.

To calculate:

To calculate the general and administrative expense budget for July, August and September.

Expert Solution
Check Mark

Answer to Problem 4BPSB

Solution:

The table below shows the general and administrative expense budget for July, August and September:

Particulars Amount ($)
July August September
Administrative salaries 9,000 9,000 9,000
0.9% monthly interest on the long-term notes 2,700 2,700 2,700
General and administrative expense budget 11,700 11,700 11,700

Explanation of Solution

The general and administrative expenses includeadministrative salaries and 0.9% monthly interest on the long-term notes as calculated above.

To determine

8.

Introduction:

A cash budget is a budget of expected cash receipts and disbursements during the period. These cash inflows and outflows include revenues collected, expenses paid, and loans. In other words, a cash budget is an estimated projection of the company's cash position in the future.

To calculate:

To prepare a cash budget for July, August and September.

Expert Solution
Check Mark

Answer to Problem 4BPSB

Solution:

The table below shows the cash budget for July, August and September:

Particulars Reference Amount ($)
July August September
Opening Cash Balance   40,000 96,835 141,180
Add- Cash Receipts        
Cash Sales   107,100 96,900 102,000
Account receivables   249,900 249,900 226,100
Total Cash Collection (A) 397,000 443,635 469,280
         
Total Cash Expenses-        
Account payables   51,400 50,760 81,280
Direct labor expenses   140,000 157,600 182,400
Variable factory overhead costs   23,625 26,595 30,780
Selling expenses   39,200 35,800 37,500
General and administrative expenses   11,700 11,700 11,700
Interest on short-term notes   240 0 0
Income taxes paid   10,000 0 0
Dividends paid   0 20,000 0
Equipment purchased   0 0 100,000
Total Cash Expenditure (B) 276,165 302,455 443,660
         
Net Cash Balance (A - B) 120,835 141,180 25,620
Add- Short-term notes taken   0 0 14,380
Less- Short-term notes repaid   24,000 0 0
Closing Cash Balance   96,835 141,180 40,000

Explanation of Solution

The cash budget for July, August and September as calculated above, is explained below:

1. The cash sales of the company are 30% of its total budgeted sales for respective months as per the information provided.

2. The remaining portion of total budgeted sales are credit sales for respective months, however, the collection or receipt of such account receivables are made in the following month, of the month in which such credit sales takes place.

3. Therefore, the account receivables of June will be collected in July, account receivables of July will be collected in August and account receivables of August will be collected in September respectively.

4. As per the information provided, the factory and operating expenses of the company are paid in full in the month of its expenditure itself. We have considered direct labor, factory overhead, selling expenses, general and administrative expenses as the factory and operating expenses for the given period respectively. However, the fixed factory overhead consists of depreciation cost which is a non-cash expenditure and, thus, not considered for cash budget.

5. The closing balance as on 30th June at the balance sheet includes an outstanding liability of $5,100 as accounts payable. We have discharged such liability in the month on July in the above solution.

6. Interest on short-term notes obtained is 1% per month and the same is paid at the end of such month itself. The outstanding loan amount at the beginning of the month of July is $24,000 and interest thereon is $240 respectively.

7. Due to shortfall in the cash balance at the end of the month of September, we have obtained loan of $14,380 to have a minimum required cash balance of $40,000 respectively.

Conclusion

Thus, we have maintained a minimum cash balance of $40,000 for each of the months of July, August and September as required.

To determine

9.

Introduction:

The master budget is the aggregation of all lower-level budgets produced by a company's various functional areas, such as budgeted financial statements, a cash forecast, a financing plan and so on.

To calculate:

To calculate the budgeted income statement for the quarter ending September 2017.

Expert Solution
Check Mark

Answer to Problem 4BPSB

Solution:

The table shows the budgeted income statement for the quarter ending September 2017:

Particulars Reference Amount ($) Amount ($)
Budgeted sales (A)   1,020,000
       
Total expenditure-      
Cost of goods sold-      
Purchase cost of raw materials   220,840  
Add- Raw materials inventory at beginning   35,000  
Add- Finished goods inventory at beginning   241,080  
Less- Raw materials inventory at end   15,840  
Less- Finished goods inventory at end   241,080  
Less- Cost of goods sold     240,000
Less- Direct labor expenses     480,000
Less- Factory overhead costs     141,000
Less- Selling expenses     112,500
Less- General and administrative expenses     35,100
Less- Interest on short-term notes     240
Total expenditure (B)   1,008,840
       
Budgeted net income (A – B)   11,160

Explanation of Solution

The budgeted net income as calculated above for the quarter ending September 30, 2017, is explained below:

1. The cost of goods sold for the quarter is determined as cost of raw material purchases and inventories at beginning of the quarter, while subtracting inventories at end of the quarter respectively.

2. All the expenses for such quarter have been considered such as direct labor, factory overhead, interest on short-term notes, selling, general and administrative expenses respectively.

3. The positive difference of budgeted sales and total expenditure will be the budgeted net income as calculated in the table above.

To determine

10.

Introduction:

The master budget is the aggregation of all lower-level budgets produced by a company's various functional areas, such as budgeted financial statements, a cash forecast, a financing plan and so on.

To calculate:

To prepare the budgeted balance sheet as of September30, 2017.

Expert Solution
Check Mark

Answer to Problem 4BPSB

Solution:

The table shows the budgeted balance sheet as of September30, 2017:

NABAR MANUFACTURING
Budgeted Balance Sheet as of September 30, 2017
Assets Amount ($) Liabilities and Equity Amount ($)
Cash 40,000 Accounts payable 88,800
Accounts receivable 238,000 Income taxes payable 3,906
Raw materials inventory 15,840 Short-term notes payable 14,380
Finished goods inventory 241,080 Total current liabilities 107,086
Total current assets 534,920 Long-term note payable 300,000
    Total liabilities 407,086
Equipment 820,000    
Accumulated depreciation 300,000 Common stock 600,000
Equipment, net 520,000 Retained Earnings 47,834
    Total stockholders’ equity 647,834
       
Total assets 10,54,920 Total liabilities and equity 1,054,920

Explanation of Solution

The budgeted balance sheet as of September 30, 2017, is explained below:

1. The equipment purchased of $100,000 have been recorded in the above balance sheet and the depreciation amount of $20,000 per month is added to the accumulated depreciation respectively.

2. The retained earnings balance was $60,580 as of June 30, 2017. However, in the month of August, dividends of $20,000 are declared and paid. Therefore, we have deducted such amount as it would be paid out of retained earnings. The current quarter budgeted income after provision for income taxes assessed at 35%, amounts to $7,254 which will be transferred to the retained earnings respectively.

3. The income taxes payable $3,906 (budgeted income $11,160 * 35%) is assessed at 35% of the budgeted income in the current quarter and to be paid in October respectively.

4. Due to shortfall in the cash balance at the end of the month of September, we have obtained short-term note of $14,380 to have a minimum required cash balance of $40,000 respectively.

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Chapter 22 Solutions

Fundamental Accounting Principles

Ch. 22 - Apple regularly uses budgets. What is the...Ch. 22 - Prob. 12DQCh. 22 - Prob. 13DQCh. 22 - Prob. 14DQCh. 22 - Prob. 15DQCh. 22 - Prob. 1QSCh. 22 - Prob. 2QSCh. 22 - Components of a master budget C2 Identify which of...Ch. 22 - Prob. 4QSCh. 22 - Prob. 5QSCh. 22 - Prob. 6QSCh. 22 - Prob. 7QSCh. 22 - Prob. 8QSCh. 22 - Prob. 9QSCh. 22 - Prob. 10QSCh. 22 - Prob. 11QSCh. 22 - Prob. 12QSCh. 22 - Prob. 13QSCh. 22 - Prob. 14QSCh. 22 - Prob. 15QSCh. 22 - Prob. 16QSCh. 22 - Prob. 17QSCh. 22 - Prob. 18QSCh. 22 - Prob. 19QSCh. 22 - Prob. 20QSCh. 22 - Prob. 21QSCh. 22 - Prob. 22QSCh. 22 - Prob. 23QSCh. 22 - Prob. 24QSCh. 22 - Prob. 25QSCh. 22 - Prob. 26QSCh. 22 - Prob. 27QSCh. 22 - Prob. 28QSCh. 22 - Prob. 29QSCh. 22 - Prob. 30QSCh. 22 - Activity-based budgeting Activity-based budgeting...Ch. 22 - Prob. 32QSCh. 22 - Prob. 33QSCh. 22 - Exercise 22-1 Budget consequences C1 Participatory...Ch. 22 - Exercise 22-2 Master budget definitions C2 Match...Ch. 22 - Prob. 3ECh. 22 - Prob. 4ECh. 22 - Prob. 5ECh. 22 - Prob. 6ECh. 22 - Prob. 7ECh. 22 - Prob. 8ECh. 22 - Prob. 9ECh. 22 - Prob. 10ECh. 22 - Prob. 11ECh. 22 - Prob. 12ECh. 22 - Prob. 13ECh. 22 - Prob. 14ECh. 22 - Prob. 15ECh. 22 - Prob. 16ECh. 22 - Prob. 17ECh. 22 - Prob. 18ECh. 22 - Prob. 19ECh. 22 - Prob. 20ECh. 22 - Prob. 21ECh. 22 - Prob. 22ECh. 22 - Prob. 23ECh. 22 - Prob. 24ECh. 22 - Prob. 25ECh. 22 - Prob. 26ECh. 22 - Prob. 27ECh. 22 - Prob. 28ECh. 22 - Prob. 29ECh. 22 - Prob. 30ECh. 22 - Prob. 31ECh. 22 - Prob. 32ECh. 22 - Prob. 33ECh. 22 - Prob. 34ECh. 22 - Exercise 22-35 Activity-based budgeting A1 Render...Ch. 22 - Prob. 1APSACh. 22 - Prob. 2APSACh. 22 - Problem 22-3A Manufacturing: Preparation and...Ch. 22 - Prob. 4APSACh. 22 - Prob. 5APSACh. 22 - Prob. 6APSACh. 22 - Prob. 7APSACh. 22 - Prob. 8APSACh. 22 - Problem 22-1B Manufacturing: Preparing production...Ch. 22 - Problem 22-2B Manufacturing: Cash budget P2 A1...Ch. 22 - Problem 22-3B Manufacturing: Preparation and...Ch. 22 - Prob. 4BPSBCh. 22 - Prob. 5BPSBCh. 22 - Prob. 6BPSBCh. 22 - Prob. 7BPSBCh. 22 - Prob. 8BPSBCh. 22 - Prob. 22SPCh. 22 - Prob. 1BTNCh. 22 - Prob. 2BTNCh. 22 - Both the budget process and budgets themselves can...Ch. 22 - The sales budget is usually the first and most...Ch. 22 - Prob. 5BTNCh. 22 - Prob. 6BTNCh. 22 - Marilyn and Michelle sells a foam mattress cover...Ch. 22 - To help understand the factors impacting a sales...Ch. 22 - Prob. 9BTN
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