20BP Ultravision Inc. anticipates sal... [FREE SOLUTION]

Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen

Business Studies

16th Edition 路 768 pages

ISBN: 9781259277160

Chapter 2: 20BP (page 117)

Ultravision Inc. anticipates sales of $290,000 from January through April. Materials will represent 50 percent of sales, and because of level production, material purchases will be equal for each month during the four months of January, February, March, and April.
Materials are paid for one month after the month purchased. Materials purchased
in December of last year were $25,000 (half of $50,000 in sales). Labor costs for each of the four months are slightly different due to a provision in the labor contract in which bonuses are paid in February and April. Here are the labor figures:
January
$15,000
February
18,000
March
15,000
April
20,000
Fixed overhead is $11,000 per month. Prepare a schedule of cash payments for January through April.

Expert verified

Schedule of cash payments

Months	Monthly material purchased	Payment to material purchased (A)	Monthly labor cost (B)	Monthly fixed overheads (C )	Total cash payments (A+B+C)
December	$25,000
January	36,250	25,000	15,000	11,000	51,000
February	36,250	36,250	18,000	11,000	65,250
March	36,250	36,250	15,000	11,000	62,250
April	36,250	36,250	20,000	11,000	67,250

$\begin{array}{rcl} Sales per month & = & \frac{Total sales of 4 months}{Number ofmonth} \\ = & \frac{$ 290, 000}{4} \\ = & $ 72, 500 \end{array}$

$\begin{array}{rcl} Monthly material purchased & = & 50 % of sales per month \\ = & 50 % 脳 $ 72, 500 \\ = & $ 36, 250 \end{array}$

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JONES CORPORATION
Current assets		Liabilities
Cash	\(20,000	Accounts payable	\)100,000
Accounts receivable	80,000	Bonds payable (long term)	80,000
Inventory	50,000
Long Term Assets		Stockholder鈥檚 Equity
Fixeed assets	\(500,000	Common Stock	\)150,000
Less: Accumulated Depreciation	(150,000)	Paid in capital	70,000
Net fixed assets*	350,000	Retained earnings	100,000
Total assets	\(500,000	Total Liab. And equity	\)500,000

JONES CORPORATION
Sales (on credit)	\(1,250,000
Cost of goods sold	750,000
Gross profit	\)500,000
Selling and administrative expenses	257,000
Less: depreciation expenses	50,000
Operating profits	\(193,000
Interest expenses	8,000
Earning before taxes	\)185,000
Tax expenses	92,500
Net income	\(92,500

SMITH CORPORATION
Current assets		Liabilities
Cash	\(35,000	Accounts payable	\)75,000
Marketable securities	7,500	Bonds payable (long term)	210,000
Accounts receivable	70,000
Inventory	75,000
Long term assets		Stockholder鈥檚 equity
Fixed assets	\(500,000	Common stock	\)75,000
Less: accumulated depreciation	250,000	Paid in capital	30,000
Net fixed assets*	250,000	Retained earnings	47,500
Total assets	\(437,500	Total liab. And equity	\)437,500

SMITH CORPORATION
Sales (on credit)	\(1,000,000
Cost of goods sold	600,000
Gross profit	\)400,000
Selling and administrative expenses	224,000
Less: depreciation expenses	50,000
Operating profits	\(126,000
Interest expenses	21,000
Earning before taxes	\)105,000
Tax expenses	52,500
Net income	\(52,500

Sales	\( 2790000
Cost of goods sold	1790000
Gross Profits	\)1000000
Selling and administrative expenses	302000
Operating profits	\(698000
Interest Expense	54800
Income before taxes	\)643200
Taxes30%	192960
Income after-tax	$ 450240