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Chapter 22: Q30E (page 1236)

Preparing the financial budget鈥攂udgeted balance sheet

Barker, Inc. has the following balance sheet at December 31, 2018:

Barker projects the following transactions for 2019:

Sales on account, \(20,000

Cash receipts from customers from sales on account, \)17,600

Purchase of raw materials on account, \(7,000

Payments on account, \)3,500

Total cost of completed products, \(16,600, which includes the following:

Raw materials used, \)7,100

Direct labor costs incurred and paid, \(3,900

Manufacturing overhead costs incurred and paid, \)4,800

Depreciation on manufacturing equipment, \(800

Cost of goods sold, \)14,800

Selling and administrative costs incurred and paid, \(500

Purchase of equipment, paid in 2019, \)2,000

Prepare a budgeted balance sheet for Barker, Inc. for December 31, 2019. (Hint: It may be helpful to trace the effects of each transaction on the accounting equation to determine the ending balance of each account.)

Short Answer

Expert verified

Answer

The total of balance sheet is $28,350

Step by step solution

01

Preparation of budgeted balance sheet

Barker Inc.

Budgeted Balance Sheet

For December 31, 2019

Assets

Current Assets:



Cash

$5,300


Accounts Receivables

$3,800


Raw material inventory

$400


Finished goods inventory

$3,150


Total current assets


$12,650

Property, plant, and equipment



Equipment

18,000


Less: Accumulated depreciation

($2,300)

$15,700

Total Assets


$28,350

Liabilities

Current Liabilities:



Accounts payable

$4,500


Stockholder鈥檚 Equity

Common stock, no par

$6,500


Retained earnings

$17,350


Total stockholder鈥檚 equity


$23,850

Total liabilities and stockholder鈥檚 equity


$$28,350

02

Preparation of cash budget

Cash in beginning

$2,400

Cash receipts from customers from sales on account

$17,600

Cash available

$20,000

Less: Payments


Payments on account

$3,500

Direct labor cost incurred and paid

$3,900

Manufacturing overhead

$4,800

Selling and administrative expenses

$500

Purchase of equipment

$2,000

Total cash payments

$12,700

Ending cash balance

$5,300

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Most popular questions from this chapter

Preparing a financial budget鈥攃ash budget, sensitivity analysis

Leichter Auto Parts, a family-owned auto parts store, began January with \(10,500 cash. Management forecasts that collections from credit customers will be \)11,000 in January and \(15,200 in February. The store is scheduled to receive \)8,500 cash on a business note receivable in January. Projected cash payments include inventory purchases (\(15,600 in January and \)14,800 in February) and selling and administrative expenses (\(2,900 each month).

Leichter Auto Part'sbank requires a \)10,000 minimum balance in the store鈥檚 checking account. At the end of any month when the account balance falls below \(10,000, the bank automatically extends credit to the store in multiples of \)1,000. Leichter Auto Parts borrows as little as possible and pays back loans in quarterly installments of \(2,000, plus 4% APR interest on the entire unpaid principal. The first payment occurs three months after the loan.

Requirements

1. Prepare Leichter Auto Part'scash budget for January and February.

2. How much cash will Leichter Auto Parts borrow in February if collections from customers that month total \)14,200 instead of $15,200?

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.)

How is benchmarking beneficial?

Explain the difference between strategic and operational budgets

What is the formula used to determine the number of units to be produced?
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