Introduction to Managerial Accounting(Alternate Problems—Set B, Chapter 7 PROBLEM 7-22B)
cybacatx
Introduction to Managerial Accounting, 4th Edition, by Brewer, Garrison, and Noreen
Alternate Problems—Set B, Chapter 7
PROBLEM 7-22B
Completing a Master Budget
(LO2, LO4, LO7, L08, LO9, LO10)
CHECK FIGURE
(2a) February purchases: $254,800
(4) February ending cash balance: $30,400
Spektra Company, a home furnishings store, prepares its master budget on a quarterly basis. The following data
have been assembled to assist in preparing the master budget for the first quarter:
a. As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account
balances:
Debits
Credits
Cash........................................... $ 31,000
Accounts Receivable................... 135,000
Inventory.................................... 161,700
Building and Equipment (net)..... 160,000
Accounts Payable.......................
$178,000
Capital Stock..............................
65,000
Retained Earnings.......................
0 244,700
$487,700 $487,700
b. Actual sales for December and budgeted sales for the next four months are as follows:
December (actual)....
January....................
February..................
March......................
April........................
$300,000
$330,000
$350,000
$370,000
$360,000
c. Sales are 55% for cash and 45% on credit. All payments on credit sales are collected in the month following
sale. The accounts receivable at December 31 are a result of December credit sales.
d. The company’s gross margin is 30% of sales. (In other words, cost of goods sold is 70% of sales.)
e. Monthly expenses are budgeted as follows: salaries and wages, $18,000 per month: advertising, $15,000 per
month; shipping, 4% of sales; other expense, 8% of sales. Depreciation, including depreciation on new assets
acquired during the quarter, will be $24,000.
Each month’s ending inventory should equal 70% of the following month’s cost of goods sold.
g. 25% of a month’s inventory purchases are paid for in the month of purchase; the remainder is paid for in the
following month.
h. During February, the company will purchase land for $22,000 cash. During March, land will be purchased for
cash at a cost of $2,000.
i. During January, the company will declare and pay $30,000 in cash dividends.
j. Management wants to maintain a minimum cash balance of $30,000. The company has an agreement with a
local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a
total of $40,000. The interest rate on these loans is 1% per month and for simplicity we will assume the interest
is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end
of the quarter.
© The McGraw-Hill Companies, Inc., 2008. All rights reserved.
1
Introduction to Managerial Accounting, 4th Edition, by Brewer, Garrison, and Noreen
Alternate Problems—Set B, Chapter 7
Required:
Using the data above, complete the following statements and schedules for the first quarter:
1. Schedule of expected cash collections:
January February
Cash sales.............................. $ 181,500
Credit sales............................
135,000
Total cash collections............ $ 316,500
March
Quarter
January
February March
Budgeted cost of goods sold. . $231,000 * $245,000
Add desired ending inventory
171,500 †
Total needs............................
402,500
Less beginning inventory.......
161,700
Required purchases............... $240,800
* $330,000 sales × 70% cost ratio = $231,000
†$245,000 × 70% = $171,500
Quarter
2. a.
Inventory purchases budget:
b. Schedule of expected cash disbursements for merchandise purchases:
January
December purchases.............. $178,000
January purchases..................
60,200
February purchases................
March purchases....................
Total cash disbursements for
purchases........................... $238,200
February
March
$180,600
Quarter
$178,000
240,800
3. Schedule of expected cash disbursements for selling and administrative expenses:
Salaries and wages................
Advertising............................
Shipping................................
Other expenses......................
Total cash disbursements for
selling and administrative
expenses............................
January
$18,000
15,000
13,200
26,400
February
March
Quarter
$72,600
© The McGraw-Hill Companies, Inc., 2008. All rights reserved.
2
Introduction to Managerial Accounting, 4th Edition, by Brewer, Garrison, and Noreen
Alternate Problems—Set B, Chapter 7
4. Cash budget:
January
Cash balance, beginning........ $ 31,000
Add cash collections.............. 316,500
Total cash available............... 347,500
Less cash disbursements:
Purchases of inventory....... 238,200
Selling and administrative
expenses.........................
72,600
Purchases of land...............
0
Cash dividends...................
30,000
Total cash disbursements. . . 340,800
Excess (deficiency) of cash. . .
6,700
Financing:
Etc.
February
March
Quarter
5. Prepare an absorption costing income statement for the quarter ending March 31 as shown in Schedule 9 in the
chapter.
6. Prepare a balance sheet as of March 31.
- 10 years ago
Purchase the answer to view it
- problem_7.docx