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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Income statement
Sales	\(250,000
Expenses	192,000
Earnings before interest and taxes	\)58,000
Interest	7,500
Earnings before taxes	\(50,500
Taxes	15,500
Earning after taxes	\)35,000
Dividends	\(7,000

BALANCE SHEET
Assets		Liabilities and Stockholder鈥檚 equity
Cash	\)8,500	Accounts payable	\(26,400
Accounts receivable	63,000	Accrued wages	2,350
Inventory	91,000	Accrued taxes	3,750
Current assets	\)162,500	Current liabilities	\(32,500
Fixed assets	85,000	Notes payable	7,500
		Long term debts	17,500
		Common stock	125,000
		Retained earnings	65,000
Total assets	\)247,500	Total liabilities and stockholder鈥檚 equity	$247,500

Accumulated depreciation	\(309,000
Retained earnings	187,000
Cash	14,000
Bonds payable	136,000
Accounts receivable	54,000
Plant and equipment 鈥� original cost	775,000
Accounts payable	35,000
Allowance for bad debts	9,000
Common stock, \)1 par, 100,000 share outstanding	100,000
Inventory	70,000
Preferred stock, $59 par, 1,000 share outstanding	59,000
Marketable securities	24,000
Investments	20,000
Notes payable	34,000
Capital paid in excess of par (common stock)	88,000