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Chapter # 17 Budgeting

Ex # 2

(1)
Expected cash collection during February
Collection from Dec. Sales ( $11,310
Collection from Jan. Sales ($65,000 × 30%) 19,500
Collection from Feb. Sale ($54,000 × 55%) 29,700
Total collection during February $60,510

(2)
Cash Balance February 1
Cash balance – Jan. 1 $5,000
Expected collection during January
Collection from Nov. Sales ( $11,700
Collection from Dec. Sales ( 26,100
Collection from Jan. Sales ($65,000 × 55%) 35,750 73,550

Cash available during January $78,550

Expected cash disbursement

December Purchases $10,000
Other expenses 41,000 51,000
Expected cash balance Feb. 1 $27,550

(3)

Expected Cash balance Feb. 28

Expected cash balance Feb. 1 $27,550
Expected collection during Feb. 60,510
Cash available during Feb. $88,060
Expected cash disbursement during Feb.
Jan. purchases $12,500
Other expenses 41,000 53,500
Expected cash balance Feb. 28 $34,560
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Ex # 3

(1) Expected cash collection in 19B

Trade A/R – Dec. 31 19B $84,000
Budgeted 19B cash sales ($1,200,000 × 0.20) 240,000
Remaining Sales Collection
Budgeted 19B Remaining stales
($1,200,000 × 0.80) $960,000
Trade A/R Dec. 31 19A (78,000)
Uncollectible Accounts (5,000) 877,000
Cash collection in 19B $1,201,000

(2) Cash disbursement in 19B for Purchase of Material

Cost of goods sold $840,000
Less: Inventory Dec. 31 19B 140,000
Cost of goods available for sale 980,000
Less: Inventory Dec. 31 19A 150,000
Purchases 19B 830,000
Less: Credit Purchases (98,000 – 95,000) 3,000
Cash disbursement of material purchased $827,000

(3) Cash Disbursement for Variable & Fixed General & Admin expenses 19B

Variable General & Admin expenses

19A Expenses ($1,100,000 × 0.10) × 0.50 $55,000
19B Expenses ($120,000 × 0.50) 60,000
$115,000
Fixed General & Admin expense
19A Expenses (100,000 – 40,000) × 0.20 $12,000
19B Expenses (100,000 – 40,000) × 0.80 48,000 60,000
Total cash disbursement $175,000
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Ex # 4
Schmid Company
Income Statement

Rs. Rs. Rs. Rs.

Sales 360,000 720000 1080000 1440000
Less: Cost goods sold 252,000 504000 756000 1008000
Gross Profit (Sale × 30%) 108000 216000 324000 432000
Less: Commercial Expenses
Uncollectible Account (Sale × 1%) 3600 7200 10800 14400
Depreciation 10000 10000 10000 10000
Marketing expenses
Variable (sale × 12%) 43200 86400 129600 172800
Fixed 48000 48000 48000 48000
Admin expenses
Variable (Sale × 3%) 10800 21600 32400 43200
Fixed 34,200 34,200 34,200 34,200
Total Commercial expenses 149,800 207,400 265,000 322,600
Net Income (loss) (41,800) 8,600 59,000 109,400

Depreciation on Warehouse, office, and delivery facilities and Equipments

Annual Depreciation =

Cost Price = Rs. 800,000

Residual Value = Scrap Value = Break Up Value = 0

Useful life = Total life = Estimated life = 20 years

Annual Depreciation =

Quarterly Depreciation =

Note:

Commercial expenses means operating expenses

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Ex # 5
(1)

Hardware Manufacturing Company

Forecasted Income Statement (000 omitted)
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
Sales
Commercial $250 $266 $275 $300 $1,091
Government 100 120 110 115 445
Total Sales $350 $386 $385 $415 $1,536
Less: Cost of goods sold (sale × 46%) 161 178 177 191 707
Gross Profit $189 $208 $208 $224 $829
Commercial expenses
advertising $4 $4 $4 $4 $16
selling expenses (Sale × 10%) 35 39 39 42 155
Amin expenses (Gross profit × 16.8%) 32 35 35 $38 $140
General office expenses (Gross Profit × 12%) 23 25 25 27 100
Total 94 103 103 $111 $411
Operating income 95 105 105 113 418
Add: Other income 8 8 8 $8 $32
Income before tax 103 113 113 121 450
Less: Tax (Income before tax × 40%) 41 45 45 $48 $179
Net Income $62 $68 $68 $73 $271
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Ex # 5
(2)

Hardware Manufacturing Company

Forecasted Income Statement (000 omitted)
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
Sales
Commercial $263 $279 $289 $315 $1,146
Government 100 120 110 115 445
Total Sales $363 $399 $399 $430 $1,591
Less: Cost of goods sold(sale × 46%) 167 184 184 198 733
Gross Profit $196 $215 $215 $232 $858
Commercial expenses
advertising $4 $4 $4 $4 $16
Selling expenses (Sale × 10%) 36 40 40 43 159
Amin expenses (Gross profit × 16.8%) 33 36 36 $39 $144
General office expenses (Gross Profit × 12%) 24 26 26 28 104
Total 97 106 106 $114 $423
Operating income 99 109 109 118 435
Add: Other income 8 8 8 $8 $32
Income before tax 107 117 117 126 467
Less: Tax (Income before tax × 40%) 43 47 47 $50 $187
Net Income $64 $70 $70 $76 $280