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Assignment

3 (2/57)

1. Favata Company has the following information:

Month

Budgeted Sales

June

$60,000

July

51,000

August

40,000

September

70,000

October

72,000

In addition, the cost of goods sold rate is 70% and the desired inventory level is 30% of next month's cost of sales.

Required:

Prepare a purchases budget for July through September.

 

Answer:

July

Aug

Sept

Total

Desired ending inventory $ 8,400

$14,700

$15,120

$15,120

Plus COGS

35,700

28,000

49,000

112,700

Total needed

44,100

42,700

64,120

127,820

Less beginning inventory 10,710

8,400

14,700

10,710

Total purchases

$33,390

$34,300

$49,420

$117,110

2. Tiara Company has the following historical collection pattern for its credit sales:

70% collected in month of sale 15% collected in the first month after sale 10% collected in the second month after sale 4% collected in the third month after sale 1% uncollectible Budgeted credit sales for the last six months of the year follow.

2. Tiara Company has the following historical collection pattern for its credit sales: 70% collected in

Required:

A. Calculate the estimated total cash collections during October. B. Calculate the estimated total cash collections during the year's fourth quarter.

Answer:

2. Tiara Company has the following historical collection pattern for its credit sales: 70% collected in

3. Russell Company has the following projected account balances for June 30, 2011:

Accounts payable

$80,000

Sales

$1,600,000

Accounts receivable

200,000

Capital stock

800,000

Depreciation, factory

48,000

Retained earnings

?

Inventories (5/31 & 6/30)360,000

Cash

112,000

Direct materials used

400,000

Equipment, net

480,000

Office salaries

160,000

Buildings, net

800,000

Insurance, factory

8,000

Utilities, factory

32,000

Plant wages

280,000

Selling expenses

120,000

Bonds payable

320,000

Maintenance, factory

56,000

Required:

  • a. Prepare a budgeted income statement for June 2011

  • b. Prepare a budgeted balance sheet as of June 30, 2011.

Answer:

  • A. Russell Company Budgeted Income Statement For the Month of June 2011

Sales Cost of goods sold:

$1,600,000

Materials used

Selling expenses

$400,000

Wages

280,000

Depreciation

48,000

Insurance

8,000

Maintenance

56,000

Utilities

32,000

824,000

Gross profit

776,000

Operating expenses:

$120,000

Office salaries

160,000

280,000

Net income

$496,000

  • B. Russell Company Budgeted Balance Sheet June 30, 2011

Assets:

Liabilities and Owners' Equity:

Cash

$ 112,000

Accounts payable

$ 80,000

Accounts receivable 200,000

Bonds payable

320,000

Inventories

360,000

Capital stock

800,000

Equipment, net

480,000

Retained earnings*

752,000

Buildings, net

800,000

Total

$1,952,000

Total

$1,952,000

*$1,952,000 - ($80,000 + $320,000 + $800,000) = $752,000