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Problem 22-4B Manufacturing: Preparation of a complete
The management of Nabar Manufacturing prepared the following estimated balance sheet for June 2019.
Assets Liabilities and Equity
Cash.............................. $ 40,000 Accounts payable................... $ 51,400
Raw materials inventory.............. 35,000 Short-term notes payable ............ 24,000
Finished goods inventory............. 241,080 Total current liabilities ............... 85,400
Total current assets.................. 565,980 Long-term note payable.............. 300,000
Equipment......................... 720,000 Total liabilities...................... 385,400
Accumulated depreciation............. (240,000) Common stock..................... 600,000
Equipment.net...................... 430,000
Total
Total assets......................... $1,045,980 Total liabilities and equity ............ $1,045,980
To prepare a master budget for July, August, and September of 2019. Management gathers the following information:
3. Sales were 20,000 units in June.
b. Company policy calls for a given month's ending finished goods inventory to equal 70% of the next month's expected unit sales. The June 30 finished goods inventory is 16,800 units, which does not comply with the policy.
C. Company policy calls for a given month's ending raw materials inventory to equal 20% of the next month's materials requirements. The June 30 raw materials inventory is 4,375 units (which also fails to meet the policy). The budgeted September 30 raw materials inventory is 1,980 units. Raw materials cost $8 per unit. Each finished unit requires 0.50 units of raw materials.
d. Each finished unit requires 0.50 hours of direct labor at a rate of $16 per hour. e.
$20,000 per month is treated as fixed factory overhead. f. Monthly general and administrative expenses include $9,000 administrative salaries and 0.9% monthly interest on the long-term note payable. g. Sales representatives commissions are 10% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,500.
h. The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none are collected in the month of the sale).
i. All raw materials purchases are on credit, and no payables arise from any other transactions. One month's raw materials purchases are fully paid in the next month.
j. Dividends of $20,000 are to be declared and paid in August.
k. Income taxes payable at June 30 will be paid in July. Income tax expense will be assessed at 35% in the quarter and paid in October.
l. Equipment purchases of $100,000 are budgeted for the last day of September.
m. The minimum ending cash balance for all months is $40,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance.
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- Question 1 From the following information prepare a monthly cash budget for the three months ending 31st Dec.2020 Sales Materials Wages Production Admin. Selling, etc Month (RM) (RM) (RM) (RM) (RM) June 6,000 3,600 1,300 450 320 July 6,500 4,000 1,500 450 320 Aug. 7,000 4,800 1,500 500 350 Sep. 7,500 4,500 1,500 600 350 Oct. 8,000 4,600 1,600 600 400 Nov. 8,500 5,000 1,800 700 400 Dec. 9,000 5,200 2,000 700 450 Credit terms Sales 3 months to debtors. 10% of sales are on cash. On an average, 50% of credit sales are paid on the due dates while the other 50% are paid in the month following Creditors for material – 2 months. Lag in payment Wages. 1/4 month, overheads 1/2 month. Other information Plant and Machinery to be installed in Aug. at a cost of RM30,000. It will be paid for by monthly installments of RM1,000 each from 1st Oct.; Preference share dividend @ 6% on RM100,000 are to be paid on 1st Dec. Calls on 500 equity shares @ RM2 per share expected on 1st November; Dividends from…arrow_forwardCash receipts budget Scottsdale Co. has actual sales for July and August and forecast sales for September, October, November, and December as follows:Actual:July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 98,000August . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,000Forecast:September . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,000October . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,000November . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,000December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,000Based on past experience, it is estimated that 30% of a month’s sales are collected in the month of sale, 55% are collected in the month following the sale, and 10% are collected in the second month following the sale.Required:Calculate the estimated cash receipts for September, October, and…arrow_forwardExercise 7 (Cash Budget Analysis) A cash budget, by quarters, is given below for a retail company. (000 omitted). The company requires a minimum cash balance of P5,000 to start each quarter. Quarter 1 2 3 4 Year Cash balance, beginning..................... P9 P? P? P? P? Add collections from customers….. ? ? 125 ? 391 Total cash available………………. 85 ? ? ? ? Less disbursements: Purchase of inventory….................. 40 58 ? 32 ? Operating expenses…………... ? 42 54 ? 180 Equipment purchases…................ 10 8 8 ? 36 Dividends…………………….. 2 2 2 2 ? Total disbursement………………..…arrow_forward
- Budgeted income statement and balance sheet As a preliminary to requesting budget estimates of sales, costs, and expenses for the fiscal year beginning January 1, 2017, the following tentative trial balance as of December 31, 2016, is prepared by the Accounting Department of Regina Soap Co.: Cash............................................................. 85,000 Accounts Receivable............................................... 125,600 Finished Goods................................................... 69,300 Work in Process................................................... 32,500 Materials......................................................... 48,900 Prepaid Expenses................................................. 2,600 Plant and Equipment.............................................. 325,000 Accumulated Depreciation Plant and Equipment.................. 156,200 Accounts Payable................................................. 62,000 Common Stock, 10 par........................................... 180,000 Retained Earnings................................................. 290,700 688,900 688,900 Factory output and sales for 2017 are expected to total 200,000 units of product, which are to be sold at 5.00 per unit. The quantities and costs of the inventories at December 31, 2017, are expected to remain unchanged from the balances at The beginning of the year. Budget estimates of manufacturing costs and operating expenses for the year are summarized as follows: Estimated Costs and Expenses Cost of goods manufactured and sold: Fixed (Total for Year) Direct materials................................................ 1.10 Direct labor.................................................... 0.65 Factory overhead: Depreciation of plant and equipment.......................... 40,000 Other factory overhead....................................... 12,000 0.40 Selling expenses: Sales salaries and commissions.................................. 46,000 0.45 Advertising.................................................... 64,000 Miscellaneous selling expense.................................. 6,000 0.25 Administrative expenses: Office and officers salaries...................................... 72,400 0.12 Supplies....................................................... 5,000 0.10 Miscellaneous administrative expense........................... 4,000 0.05 Balances, of accounts receivable, prepaid expenses, and accounts payable at the end of the year are not expected to differ significantly from the beginning balances. Federal income tax of 30,000 on 2017 taxable income will be paid during 2017. Regular quarterly cash dividends of 0.15 per share are expected to be declared and paid in March, June, September, and December on 18,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for 75,000 cash in May. Instructions 1. Prepare a budgeted income statement for 2017. 2. Prepare a budgeted balance sheet as of December 31, 2017, with supporting calculations.arrow_forwardBudgeted income statement and supporting budgets The, budget director of Feathered Friends Inc., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for December 2016: a. Estimated .sales for December: Bird house 3,200 units at 50 per unit Bird feeder 3,000 units at 70 per unit b. Estimated inventories at December 1: Direct materials: Finished products: Wood 200 ft Bird house....... 320 units at 27 per unit Plastic 240 lbs. Bird feeder....... 270 units at 40 per unit c. Desired inventories at December 31: Direct materials: Finished products: Wood 220 ft Bird house....... 290 units at 27 per unit Plastic 200 lbs. Bird feeder....... 250 units at 41 per unit d. Direct materials used in production: In manufacture of Bird House: In manufacture of Bird Feeder: Wood 0.80 ft. per unit of product Wood........... 1.20 ft per unit of product Plastic 050 lb. per unit of product Plastic........... 0.75 lb. per unit of product e. Anticipated cost of purchases and beginning and ending inventory of direct materials: Wood 7.00 per ft. Plastic................. 1.00 per lb. f. Direct labor requirements: Bird House: Fabrication Department 0.20 hr. at 16 per hr. Assembly Department 0.30 hr. at 12 per hr. Bird Feeder: Fabrication Department 0.40 hr. at 16 per hr. Assembly Department 0.35 hr. at 12 per hr. g. Estimated factory overhead costs for December. Indirect factory wages 75,000 Power and light 6,000 Depreciation of plant and equipment 23,000 Insurance and property tax 5,000 h. Estimated operating expenses for December: Sales salaries expense 70,000 Advertising expense 18,000 Office salaries expense 21,000 Depreciation expenseoffice equipment 600 Telephone expenseselling 550 Telephone expenseadministrative 250 Travel expenseselling 4,000 Office supplies expense 200 Miscellaneous administrative expense 400 i. Estimated other income and expense for December: Interest revenue 200 Interest expense 122 j. Estimated lax rate: 30% Instructions 1. Prepare a sales budget for December. 2. Prepare a production budget for December. 3. Prepare a direct materials purchases budget for December. 4. Prepare a direct labor cost budget for December. 5. Prepare a factory overhead cost budget for December. 6. Prepare a cost of goods sold budget for December. Work in process at the beginning of December is estimated to be 29,000 and work in process at the end of December is estimated to be 35,400. 7. Prepare a selling and administrative expenses budget for December. 8. Prepare a budgeted income statement for December.arrow_forwardExercises 1: Questions for discussion 1. Describe the items reflected in the sales budget. 2. List the items included in the production budget 3. Identify the items that comprise the operating budget Exercises 2: Word Problems Roel Trading Company presents the actual sales for the first three months of year 2019 in its own products as follows: Product B P 540,000 P 567,000 P 595,350 Product A Total Sales Janaury February March P 880,000 P 941,000 P 1,006,750 The business expects that the trends for the past three months will P 340,000 P 374,000 P 411400 continue in April and May 2019. Required: Determined the projected sales for April and May 2019 for the two products. Round the amounts to thousand pesos.arrow_forward
- Question #2 Cash budgeting is critical to a company’s financial information needs. The following information was extracted from the records of A & B Manufacturing Company Limited. The opening cash balances on January 01, 2021 was expected to be $30,000. The budgeted sales were as follows: Budgeted Sales Month Year $November 2020 80,000December 2020 90,000January 2021 80,000February 2021 75,000March 2021 60,000April 2021 70,000 Analysis of records shows that debtors settle according to the following pattern: 70% within the month of sale 30% the following month Extracts of the purchases budget were as follows:Purchases budget Month Year $December 2020 65,000January 2021 50,000February 2021 75,000March 2021 70,000 …arrow_forwardQuestion #2 Cash budgeting is critical to a company’s financial information needs. The following information was extracted from the records of A & B Manufacturing Company Limited. The opening cash balances on January 01, 2021 was expected to be $30,000. The budgeted sales were as follows: Budgeted Sales Month Year $November 2020 80,000December 2020 90,000January 2021 80,000February 2021 75,000March 2021 60,000April 2021 70,000 Analysis of records shows that debtors settle according to the following pattern: 70% within the month of sale 30% the following month Extracts of the purchases budget were as follows:Purchases budget Month Year $December 2020 65,000January 2021 50,000February 2021 75,000March 2021 70,000 …arrow_forwardQuestion #2 Cash budgeting is critical to a company’s financial information needs. The following information was extracted from the records of A & B Manufacturing Company Limited. The opening cash balances on January 01, 2021 was expected to be $30,000. The budgeted sales were as follows: Budgeted Sales Month Year $November 2020 80,000December 2020 90,000January 2021 80,000February 2021 75,000March 2021 60,000April 2021 70,000 Analysis of records shows that debtors settle according to the following pattern: 70% within the month of sale 30% the following month Extracts of the purchases budget were as follows:Purchases budget Month Year $December 2020 65,000January 2021 50,000February 2021 75,000March 2021 70,000 …arrow_forward
- Assets Cash Accounts receivable Inventory Buildings and equipment, net of depreciation Total assets Minden Company Balance Sheet April 30 Liabilities and Stockholders' Equity Accounts payable Note payable Common stock Retained earnings Total liabilities and stockholders' equity The company is in the process of preparing a budget for May and has assembled the following data: a. Sales are budgeted at $255,000 for May. Of these sales, $76,500 will be for cash; the remainder will be credit sales. One-half of a month's credit sales are collected in the month the sales are made, and the remainder is collected in the following month. All of the April 30 accounts receivable will be collected in May. b. Purchases of inventory are expected to total $189,000 during May. These purchases will all be on account. Forty percent of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the April 30 accounts payable to suppliers will be paid during…arrow_forward189 Exercise 5-11 William Go is the owner and manager of the Kentucky Company. He is in the process of preparing a budget for the first six months of 2021, Income statement estimates for each month are given below: Jan. Feb. May March P92,000 P82,000 P102,000 P146,000 P172,000 P188,000 P50,000 P46,000 P56,000 P68,000 P88,000 April June Sales Cost of sales P96,000 28,000 Expenses Depreciation Total 16,000 8,000 P74,000 P68,000 P80,000 P18,000 P14,000 14,000 8,000 16,000 8,000 24,000 10,000 P98,000 P122,000 P134,000 22,000 8,000 10,000 Net income P22,000 P48,000 P50,000 P54,000 in certain balance sheet accounts during each month. (decreases) are given below: During the six-month period, William anticipates the following changes The increases and March Accounts receivableP(6,000) P4,000 P12,000 Jan. Feb. May P(4,000) P6,000 P(8,000) (10,000) 16,000 (4,000) (4,600) April June Inventories 8,000 (8,000) 14,000 (6,000 ) Accounts payable 2,000 2,000 The cash balance on January 1, 2021 is…arrow_forwardData Year 2 Quarter Year 3 Quarter 1 2 3 4 1 2 Budgeted unit sales 40,000 60,000 100,000 50,000 70,000 80,000 • Selling price per unit • Accounts receivable, beginning balance • Sales collected in the quarter sales are made • Sales collected in the quarter after sales are made • Desired ending finished goods inventory is • Finished goods inventory, beginning • Raw materials required to produce one unit • Desired ending inventory of raw materials is • Raw materials inventory, beginning • Raw material costs • Raw materials purchases are paid and • Accounts payable for raw materials, beginning balance $12 per unit $65,000 75% 25% 30% of the budgeted unit sales of the next quarter 12,000 units 5 pounds 10% of the next quarter's production needs 23,000 pounds $0.80 per pound 60% in the quarter the purchases are made 40% in the quarter following purchase $81,500 •Direct labor cost per hour •Direct labor hour per unit $15 per hour 0.2 hour per unit $2 per hour $60,000 •Variable MOH rate…arrow_forward
- Financial & Managerial AccountingAccountingISBN:9781285866307Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning