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Chapter 22: 18RQ (page 1228)
What is the formula used to determine the amount of merchandise inventory to be purchased?
To calculate the amount of merchandise inventory purchase, you will need the value of beginning and closing inventory and the cost of goods sold.
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What is the formula used to determine the amount of direct materials to be purchased?
Preparing a financial budget鈥攂udgeted balance sheet
Use the following June actual ending balances and July 31, 2018, budgeted amounts for Omas to prepare a budgeted balance sheet for July 31, 2018.
a. June 30 Merchandise Inventory balance, \(17,770
b. July purchase of Merchandise Inventory, \)4,400, paid in cash
c. July payments of Accounts Payable, \(8,400
d. June 30 Accounts Payable balance, \)10,700
e. June 30 Furniture and Fixtures balance, \(34,100; Accumulated Depreciation balance, \)29,880
f. June 30 total stockholders鈥� equity balance, \(28,020
g. July Depreciation Expense, \)500
h. Cost of Goods Sold, 60% of sales
i. Other July expenses, including income tax, \(2,000, paid in cash
j. June 30 Cash balance, \)11,600
k. July budgeted sales, all on account, \(12,600
l. June 30 Accounts Receivable balance, \)5,130
m. July cash receipts from collections on account, $14,700
(Hint: It may be helpful to trace the effects of each transaction on the accounting equation to determine the ending balance of each account.)
In a manufacturing company, what are the three types of budgets included in the master budget? Describe each type.
Understanding the components of the master budgetThe following are some of the components included in the master budget of amerchandising company.
a. Budgeted balance sheet
b. Sales budget
c. Capital expenditures budget
d. Budgeted income statement
e. Cash budget
f. Inventory, purchases, and cost of goods sold budget
g. Selling and administrative expense budget
List the items of the master budget in order of preparation.
Preparing a financial budget鈥攕chedule of cash receipts, schedule of cash payments, cash budget
Haney Company has provided the following budget information for the first quarter of 2018:
Total sales \(214,000 Budgeted purchases of direct materials 40,300 Budgeted direct labor cost 37,200 Budgeted manufacturing overhead costs:
Variable manufacturing overhead 1,150 Depreciation 1,200 Insurance and property taxes 6,600 Budgeted selling and administrative expenses: Salaries expense 13,000 Rent expense 2,500 Insurance expense 1,100 Depreciation expense 350 Supplies expense 4,280 Additional data related to the first quarter of 2018 for Haney Company:
a. Capital expenditures include \)38,000 for new manufacturing equipment, to be purchased and paid in the first quarter.
b. Cash receipts are 65% of sales in the quarter of the sale and 35% in the quarter following the sale.
c. Direct materials purchases are paid 50% in the quarter purchased and 50% in the next quarter.
d. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred.
e. Income tax expense for the first quarter is projected at \(44,000 and is paid in the quarter incurred.
f. Haney Company expects to have adequate cash funds and does not anticipate borrowing in the first quarter.
g. The December 31, 2017, balance in Cash is \)45,000, in Accounts Receivable is \(23,200, and in Accounts Payable is \)9,000.
Requirements
1. Prepare Haney Company鈥檚 schedule of cash receipts from customers and schedule of cash payments for the first quarter of 2018.
2. Prepare Haney Company鈥檚 cash budget for the first quarter of 2018.
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