Loose Leaf For Fundamental Accounting Principles Format: Loose-leaf
Loose Leaf For Fundamental Accounting Principles Format: Loose-leaf
24th Edition
ISBN: 9781260158557
Author: Wild
Publisher: Mcgraw Hill Publishers
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Chapter 22, Problem 8APSA
To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 1-

To prepare:

Monthly sales budget

Expert Solution
Check Mark

Answer to Problem 8APSA

A sales budget is a budget which is used to estimate the expected units of sales in dollars and also helps to determine the estimated earnings during a period.

    DIMSDALE SPORTS COMPANY
    Monthly sales budget (in units and sales value)
    JanuaryFebruaryMarchQuarter
    Sales in units7,0009,00011,00027,000
    Selling price per unit$55$55 $55 $55
    Dollar sales value($)385,000495,000605,0001,485,000

Explanation of Solution

Dollar sales value for each month is calculated as follows-

  Dollar sales value=Sales in units×Selling price per unitDollar sales value for January=7,000×$55 Dollar sales value for January=$385,000 Dollar sales value for February=9,000×$55 Dollar sales value for February=$495,000 Dollar sales value for March=11,000×$55 Dollar sales value for March=$605,000 Dollar sales value for Quarter=27,000×$55 Dollar sales value for Quarter=$1,485,000

Conclusion:

Thus, the monthly sales budget has been prepared both in units and sales value.

To determine

Concept Introduction:

Master Budget-

Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

Requirement 2-

To prepare:

Merchandise purchases budget

Expert Solution
Check Mark

Answer to Problem 8APSA

Budgeted purchases:

Budgeted purchases are the estimates of purchases of a particular month based on the sales requirement and ending inventory requirement and the budgeted beginning inventory.

    DIMSDALE SPORTS COMPANY
    Monthly merchandise purchases budgets
    JanuaryFebruaryMarchQuarter
    Budgeted Sales for the month 7,0009,00011,000
    Ending inventory in units 1,8002,2002,000
    Total Needs8,80011,20013,000
    Less: Beginning inventory (5,000)(1,800)(2,200)
    Merchandise purchases in units required 3,8009,40010,800
    Cost per unit $30 $30 $30
    Dollar value of purchases ($)114,000282,000324,000720,000

Explanation of Solution

First, ending inventory in units is required to be calculated-

Calculation of ending inventory in units is as under-

  Ending inventory requirement = 20% of Next Months Expected sales unitsEnding inventory requirement for January =20%X Expected sales units for FebruaryEnding inventory requirement for January =20%X 9,000 unitsEnding inventory requirement for January =1,800 unitsEnding inventory requirement for February =20%X Expected sales units for MarchEnding inventory requirement for February =20% X 11,000 unitsEnding inventory requirement for February =2,200 unitsEnding inventory requirement for March =20%X Expected sales units for AprilEnding inventory requirement for March =20% X 10,000unitsEnding inventory requirement for March  = 2,000 units

Now, Merchandise purchases required is to be calculated-

  Required merchandise purchases= Ending Inventory + Expected sales of the month  Beginning Inventory

Given, Expected sales of the month-

  • January − 7,000 units
  • February − 9,000 units
  • March − 11,000 units

Ending inventory −

  • January − 1,800 units
  • February − 2,200 units
  • March − 2,000 units

Beginning inventory-

    − Ending inventory of the previous month shall be beginning inventory of current month.
    • January − 5,000 units (given)
    • February − 1,800 units
    • March − 2,000 units

    Total requirement for the month of January, February and March-

      Required merchandise purchases = Ending Inventory + Expected sales of the month  Beginning Inventory Required merchandise purchases for January=1,800 units+7,000 units5,000 units Required merchandise purchases for January=3,800 units Required merchandise purchases for February=2,200 units+9,000 units1,800 units Required merchandise purchases for February =9,400units Required merchandise purchases for March=2,000 units+11,000 units2,200 unitsRequired merchandise purchases for March=10,800units

    Dollar Value of purchases is calculated as follows-

       Dollar value of purchase =Required merchandise purchase × Cost per unit Dollar value of purchase for January=3,800 units×$30Dollar value of purchase for January=$114,000 Dollar value of purchase for February=9,400 units×$30 Dollar value of purchase for February=$282,000 Dollar value of purchase for March=10,800 units×$30 Dollar value of purchase for March=$324,000 

    Conclusion:

    Thus, the merchandise purchase budget has been prepared for the months of January, February and March.

  • To determine

    Concept Introduction:

    Master Budget-

    Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

    Requirement 3-

    To prepare:

    Monthly selling expense Budget

    Expert Solution
    Check Mark

    Answer to Problem 8APSA

      DIMSDALE SPORTS COMPANY
      Monthly Selling Expense budgets
      January ($)February ($)March ($)
      Sales commissions 77,00099,000121,000
      Sales salaries5,0005,0005,000
      Selling expenses82,000104,000126,000

    Explanation of Solution

    First we need to calculate Sales commissions.

    Calculation of sales commission is as under-

      Sales Commission=20%×SalesSales Commission for January=20%×$385,000 Sales Commission for January=$77,000 Sales Commission for February=20%×$495,000 Sales Commission for February=$99,000 Sales Commission for March=20%×$605,000Sales Commission for March=$121,000

    Sales salary for each month-

      Sales salary for each month= $60,000 12 monthsSales salary for each month=$5,000

    Selling expense for each month is calculated as under-

      Selling Expense=Sales Commission+Sales salarySelling Expense for January=$77,000+$5,000 Selling Expense for January=$82,000 Selling Expense for February=$99,000+$5,000 Selling Expense for February=$104,000 Selling Expense for March=$121,000+$5,000 Selling Expense for March=$126,000

    Conclusion:

    Thus, the selling expense budget is prepared for the month of January, February and March.

    To determine

    Concept Introduction:

    Master Budget-

    Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

    Requirement 4-

    To prepare:

    Monthly general and administrative expense Budget

    Expert Solution
    Check Mark

    Answer to Problem 8APSA

      DIMSDALE SPORTS COMPANY
      Monthly general and administrative budgets
      JanuaryFebruaryMarch
      Depreciation expense6,0007,0007,300
      General and administrative salaries 12,00012,00012,000
      Maintenance expense 2,0002,0002,000
      Total general and administrative expenses 20,00021,00021,300

    Explanation of Solution

    Given:

    Maintenance Expense = $2,000 per month

    General and administrative salaries for each month-

      General and administrative salaries for each month= Total salary for year 12 monthsGeneral and administrative salaries for each month= $144,000 12 monthsGeneral and administrative salaries for each month=$12,000

    Depreciation expense-

    Given,

    Beginning balance - $540,000

    Purchase of equipment-

    • January -$36,000
    • February-$96,000
    • March-$28,800

    January-

      Equipment balance at the end of January= Beginning balance + purchasesEquipment balance at the end of January=$540,000+$36,000Equipment balance at the end of January=$576,000

      Depreciation expense for January =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for January =( $576,0008years )×  1month 12 monthsDepreciation expense for January =$6,000

    February-

      Balance at the end of February = Balance at the end of January + PurchasesBalance at the end of February =$576,000+96,000Balance at the end of February =$672,000

      Depreciation expense for February =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for February =( $672,0008years )×  1month 12 monthsDepreciation expense for February =$7,000

    March-

      Balance at the end of March = Balance at the end of February + PurchasesBalance at the end of March =$672,000+28,800Balance at the end of March =$700,800

      Depreciation expense for March =( Equipment valueEstimated useful life )× 1month 12 monthsDepreciation expense for March =( $700,8008years )×  1month 12 monthsDepreciation expense for March =$7,300

    Total General and administrative expenses for each month is calculated as under-

       Total General and administrative expenses= Depreciationexpense+General and administrative salaries +Maintenance Expense Total General and administrative expenses for January=$6,000+$12,000+$2,000Total General and administrative expenses for January=$20,000 Total General and administrative expenses for February=$7,000+$12,000+$2,000 Total General and administrative expenses for February=$21,000 Total General and administrative expenses for March=$7,300+$12,000+$2,000 Total General and administrative expenses for March=$21,300

    Conclusion:

    Thus, the general and administrative expenses budget is prepared for the month of January, February and March.

    To determine

    Concept Introduction:

    Master Budget-

    Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

    Requirement 5-

    To prepare:

    Monthly capital expenditures Budget

    Expert Solution
    Check Mark

    Answer to Problem 8APSA

      DIMSDALE SPORTS COMPANY
      Capital Expenditures budget
      JanuaryFebruaryMarchQuarter
      Purchase of Equipment36,00096,00028,800160,800
      Purchase of Land00150,000150,000
      Total Capital expenditure36,00096,000178,800310,800

    Explanation of Solution

    Given-

    • Purchase of Equipment in January = $36,000
    • Purchase of Equipment in February = $96,000
    • Purchase of Equipment in March = $28,800
    • Purchase of Land in March = $150,000

      Total capital expenditure in March= Purchase of Equipment+ Purchase of LandTotal capital expenditure in March=$28,800 + $150,000Total capital expenditure in March=$178,800

    Conclusion:

    Thus, Capital expenditure budget is prepared.

    To determine

    Concept Introduction:

    Master Budget-

    Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

    Requirement 6-

    To prepare:

    Monthly Cash Budget

    Expert Solution
    Check Mark

    Answer to Problem 8APSA

      DIMSDALE SPORTS COMPANY
      Monthly cash budgets
      JanuaryFebruaryMarch
      Beginning cash balance 36,00030,100210,300
      Cash receipts:
      Cash sales 96,250123,750151,250
      Collection from -
      Beginning accounts receivable 125,000400,000
      Credit sales of January 173,250115,500
      Credit sales of February 222,750
      Total cash receipts 221,250697,000489,500
      Total cash available 257,250727,100699,800
      Less: Cash disbursements-
      Merchandise purchases
      Beginning accounts payable 80,000280,000
      January accounts payable 22,80091,200
      February accounts payable 56,400
      Selling expenses (Req.3)82,000104,000126,000
      General and administrative expenses excluding depreciation (Req.4)14,00014,00014,000
      Capital Expenditure (Req.5)36,00096,000178,800
      Interest on bank loan 150
      Total cash disbursements 212,150516,800466,400
      Surplus/ ( deficiency) of cash 45,100210,300233,400
      Borrowing / ( Repayment) (15,000)
      Ending cash balance 30,100210,300233,400

    Explanation of Solution

    Cash sales is calculated as under-

       Cash sales = 25% ×Total sales of the month Cash sales for January=25%×$385,000 Cash sales for January=$96,250 Cash sales for February=25%×$495,000 Cash sales for February=$123,750 Cash sales for March=25%×$605,000Cash sales for March=$151,250

    Beginning accounts receivable-

    Given-

    • January-$125,000
    • February-$400,000

    Credit Sales-

    For the month of February-

      Credit sale receipt in the month of February=60%×January Credit salesCredit sale receipt in the month of February=60%×[Total January sales ×75%]Credit sale receipt in the month of February=60%×[$385,000×75%]Credit sale receipt in the month of February=60%×$288,750Credit sale receipt in the month of February=$173,250

    For the month of March-

       Credit sale receipt ={40%×January Credit sales}+{60%×February Credit sales} Credit sale receipt ={40%×[Total January sales ×75%]}+{60%×[Total February sales ×75%]} Credit sale receipt ={40%×[$385,000×75%]}+{60%×[$495,000×75%]} Credit sale receipt ={40%×$288,750}+{60%×$371,250} Credit sale receipt =$115,500+$222,750Credit sale receipt =$338,250

    Beginning accounts payable-

    Given-

    • January-$80,000
    • February-$280,000

    Calculation of accounts payable is as under-

    For the month of February-

       Accounts payable=20%×January purchases Accounts payable=20%×$114,000Accounts payable=$22,800

    For the month of March-

      Accounts payable=( 80%×January purchases)+( 20%×February purchases)Accounts payable=( 80%×$114,000)+( 20%×$282,000)Accounts payable=$91,200+$56,400Accounts payable=$147,600

    Total cash available is calculated as under-

       Total cash available = Beginning cash balance + Total cash receipts Total cash available for January =$36,000+221,250 Total cash available for January =$257,250  Total cash available for February =$30,100+$697,000 Total cash available for February =$727,100  Total cash available for March =$210,300+$489,500Total cash available for March =$699,800

    Surplus of cash-

       Surplus of cash = Total cash available  Total Cash disbursements Surplus of cash for January = $257,250$212,150 Surplus of cash for January =$45,100  Surplus of cash for February =$727,100$516,800 Surplus of cash for February =$210,300  Surplus of cash for March =$699,800$466,400Surplus of cash for March =$233,400

      Interest on bank loan = $15,000×1% = $150

    Conclusion:

    Thus, Cash budget is prepared.

    To determine

    Concept Introduction:

    Master Budget-

    Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

    Requirement 7-

    To prepare:

    Budgeted income statement

    Expert Solution
    Check Mark

    Answer to Problem 8APSA

      DIMSDALE SPORTS COMPANY
      Income Statement
      ParticularsAmount ($)Amount ($)
      Sales (Req.1) 1,485,000
      Cost of merchandise sold 810,000
      Gross Profit 675,000
      Operating expenses:
      Selling expenses (Req.3)312,000
      General and administrative expenses (Req.4)62,300
      Interest on bank loan150374,450
      Income before tax 300,550
      Tax @ 40% 120,220
      Net operating income 180,330

    Explanation of Solution

    Cost of merchandise sold-

      Cost of merchandise sold = No. of units ×Cost priceCost of merchandise sold =27,000×$30Cost of merchandise sold =$810,000

    Gross profit is calculated as under-

      Gross profit = Sales  Cost of merchandise soldGross profit =$1,485,000$810,000Gross profit =$675,000

    Interest Expense-

      Interest on bank loan = $15,000×1% = $150

    Income before tax-

       Income before tax= SalesCost of goods soldSelling Expense General and administrative expenses Interest expenseIncome before tax=$1,485,000$810,000$312,000$62,300$150Income before tax=$300,550

    Tax Expense-

      Tax Expense=Income before tax×Tax RateTax Expense=$300,550×40%Tax Expense=$120,220

    Net Operating income is calculated as under-

      Net Operating income= Income before taxTax ExpenseNet Operating income=$300,550$120,220Net Operating income=$180,330

    Conclusion:

    Thus, Income statement is prepared for the quarter.

    To determine

    Concept Introduction:

    Master Budget-

    Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.

    Requirement 8-

    To prepare:

    Budgeted Balance sheet.

    Expert Solution
    Check Mark

    Answer to Problem 8APSA

      DIMSDALE SPORTS COMPANY
      Balance sheet as of March 31, 2020
      Amount ($)Amount ($)
      Assets
      Cash 233,400
      Accounts receivable 602,250
      Inventory 60,000
      Total current assets 895,650
      Land 150,000
      Equipment gross 610,800
      Accumulated depreciation (87,800)
      Equipment net 523,000
      Total assets 1,568,650
      Stockholder's Equity and Liabilities
      Accounts payable 549,600
      Tax payable 120,220
      Current liabilities 669,820
      Common stock 472,500
      Retained earnings 426,330
      Total Stockholder's Equity and Liabilities 1,568,650

    Explanation of Solution

    Assets

    Given,

    Land = $150,000 (from Requirement 5)

    Cash = $233,400 (from Requirement 6)

    Calculation of total current assets is as under-

       Current assets= Cash + Accounts receivable+Inventory Current assets=$233,400+$602,250+$60,000Current assets=$895,650

    Accumulated Depreciation-

       Accumulated depreciation=Beginning Accumulated depreciation+Depreciation expenses Accumulated depreciation=$67,500+$20,300Accumulated depreciation=$87,800

    Equipment-

       Equipment =Equipment grossAccumulated Depreciation Equipment =$610,800$87,800Equipment =$523,000

    Calculation of total assets is as under-

       Total Assets=Total Current assets+Land+Equipment Total Assets=$895,650+$150,000+$523,000Total Assets=$1,568,650

    Total Stockholder's Equity and Liabilities Given,

    Taxes payable = 120,220 (from requirement 7)

    Common stock = $472,500

    Accounts payable-$549,600

    Calculation of Current liabilities is as under-

      Current liabilities=Accounts payable+Taxes payableCurrent liabilities=$549,600+$120,220Current liabilities= $669,820

    Retained earnings-

      Retained earnings = Beginning retained earnings + Net IncomeRetained earnings =$246,000+$180,330Retained earnings =$426,330

    Calculation of Total Stockholder's Equity and Liabilities is as under-

       Total Stockholder's Equity and Liabilities=Current liabilities+Common stock+ Retained earnings Total Stockholder's Equity and Liabilities=$669,820+$472,500+$426,330Total Stockholder's Equity and Liabilities=$1,568,650

    Conclusion:

    Thus, Budgeted balance sheet is prepared with total of $1,568,650.

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    Chapter 22 Solutions

    Loose Leaf For Fundamental Accounting Principles Format: Loose-leaf

    Ch. 22 - Prob. 11DQCh. 22 - Prob. 12DQCh. 22 - Prob. 13DQCh. 22 - Prob. 14DQCh. 22 - Prob. 15DQCh. 22 - Prob. 16DQCh. 22 - Budget motivation C1 For each of the following...Ch. 22 - Prob. 2QSCh. 22 - Prob. 3QSCh. 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 - QS 22-20 Cash receipts, with uncollectible...Ch. 22 - Cash receipts, with uncollectible accounts P2...Ch. 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 - Prob. 31QSCh. 22 - Prob. 1ECh. 22 - Prob. 2ECh. 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 - Exercise 22-18 Budgeted cash receipts P2 Jasper...Ch. 22 - Prob. 19ECh. 22 - Prob. 20ECh. 22 - Prob. 21ECh. 22 - Prob. 22ECh. 22 - Exercise 22-23 Manufacturing: Cash...Ch. 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 - Exercise 22-32A Merchandising: Cash...Ch. 22 - Exercise 22-33A Merchandising: Budgeted balance...Ch. 22 - Prob. 34ECh. 22 - Prob. 35ECh. 22 - Prob. 1APSACh. 22 - Prob. 2APSACh. 22 - Prob. 3APSACh. 22 - Problem 22-4A Manufacturing: Preparation of a...Ch. 22 - Prob. 5APSACh. 22 - Problem 22-6AA Merchandising: Preparation of...Ch. 22 - Prob. 7APSACh. 22 - Prob. 8APSACh. 22 - Prob. 1BPSBCh. 22 - Prob. 2BPSBCh. 22 - Prob. 3BPSBCh. 22 - Problem 22-4B Manufacturing: Preparation of a...Ch. 22 - Prob. 5BPSBCh. 22 - Prob. 6BPSBCh. 22 - Prob. 7BPSBCh. 22 - Prob. 8BPSBCh. 22 - Prob. 22SPCh. 22 - Prob. 1AACh. 22 - Prob. 2AACh. 22 - Prob. 3AACh. 22 - Both the budget process and budgets themselves can...Ch. 22 - BTN 22-4 The sales budget is usually the first and...Ch. 22 - Certified Management Accountants must understand...Ch. 22 - Prob. 4BTNCh. 22 - Prob. 5BTNCh. 22 - To help understand the factors impacting a sales...
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