23-1

Chapter Master Budgets

23
and Planning

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 23-2

Budget Process
Defines goals
and objectives

Communicates plans Promotes analysis and

and instructions a focus on the future

Advantages

Coordinates
business activities Motivates employees

Provides a basis for

evaluating performance against
McGraw-Hill/Irwin past or expected results© The McGraw-Hill Companies, Inc., 2005
 23-3

Budget Committee
Consists of managers from all departments
of the organization.
Provides central guidance to insure that
individual budgets submitted from all
departments are realistic and coordinated.

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 23-4

Budget Committee

T o p M an a ge m e nt

M id d le M id d le
M a na ge m e nt M a n a ge m e nt

S u p erv is or S u p erv is or S u p erv is or S u p erv is or

Flow of Budget Data is a bottom-up process.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-5

Budget Timing

Operating Budget

1999 2000 2001 2002

The annual operating budget

may be divided into quarterly
or monthly budgets.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 23-6

Budget Timing

Continuous or
Rolling Budget

1999 2000 2001 2002

The budget may be a twelve-month

budget that rolls forward one month
as the current month is completed.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 23-7

Master Budget Components

Sales Merchandise
budget Purchases

Prepare Prepare
financial Prepare
selling and
budgets: capital
 cash general
expenditure
 income administrative
budget
 balance sheet budgets
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-8

Sales Budget

Sales
Budget

Estimated Estimated
Unit Sales Unit Price

Analysis of economic and market conditions

+
Forecasts of customer needs from marketing personnel
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-9

Sales Budget
In September 2005, Hockey Den sold
700 hockey sticks at $100 each.
Hockey Den prepared the following
sales budget for the next four months:

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 23-10

Sales Budget Exh.

23-6

HOCKEY DEN
Monthly Sales Budget
October 2005 – January 2006
Budgeted Budgeted Budgeted
Unit Sales Unit Price Total Sales
September 2005 (actual) 700 $ 100 $ 70,000

October 2005 1,000 $ 100 $ 100,000

November 2005 800 100 80,000
December 2005 1,400 100 140,000
Total 3,200 $ 100 $ 320,000

January 2006 900 $ 100 $ 90,000

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-11

Merchandise Purchases Budget

The quantity purchased is affected by:

Just-in-time inventory systems that

enable purchases of smaller, frequently
delivered quantities.

Safety stock inventory systems that

provide protection against lost sales
caused by delays in supplier shipments.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-12

Merchandise Purchases Budget Exh.

23-7

Inventory Budgeted Budgeted Budgeted

to be = ending + cost of sales – beginning
purchased inventory for the period inventory

Hockey Den buys hockey sticks for $60.00 each and

maintains an ending inventory equal to 90 percent of the
next month’s budgeted sales. 900 hockey sticks are on
hand on September 30.

Let’s prepare the purchases budget for Hockey Den.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-13

Merchandise Purchases Budget Exh.

23-8

HOCKEY DEN
Merchandise Purchases Budget
October 2005 – December 2005

October November December

Next month's unit sales 800 1,400 900
Ending inventory percentage × 90% × 90% × 90%
Budgeted ending inventory units 720 1,260 810
Add current month's unit sales
Total units needed
Deduct beginning inventory units
Number of units to be purchased
Budgeted cost per unit
Budgeted cost of purchases

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 23-14

Merchandise Purchases Budget Exh.

23-8

HOCKEY DEN
Merchandise Purchases Budget
October 2005 – December 2005

October November December

Next month's unit sales 800 1,400 900
Ending inventory percentage × 90% × 90% × 90%
Budgeted ending inventory units 720 1,260 810
Add current month's unit sales 1,000 800 1,400
Total units needed 1,720 2,060 2,210
Deduct beginning inventory units
Number of units to be purchased
Budgeted cost per unit
Budgeted cost of purchases

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 23-15

Merchandise Purchases Budget Exh.

23-8

HOCKEY DEN
Merchandise Purchases Budget
October 2005 – December 2005

October November December

Next month's unit sales 800 1,400 900
Ending inventory percentage × 90% × 90% × 90%
Budgeted ending inventory units 720 1,260 810
Add current month's unit sales 1,000 800 1,400
Total units needed 1,720 2,060 2,210
Deduct beginning inventory units 900
Number of units to be purchased 820
Budgeted cost per unit × $ 60
Budgeted cost of purchases $ 49,200

Beginning inventory is last month's ending inventory.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-16

Merchandise Purchases Budget Exh.

23-8

HOCKEY DEN
Merchandise Purchases Budget
October 2005 – December 2005

October November December

Next month's unit sales 800 1,400 900
Ending inventory percentage × 90% × 90% × 90%
Budgeted ending inventory units 720 1,260 810
Add current month's unit sales 1,000 800 1,400
Total units needed 1,720 2,060 2,210
Deduct beginning inventory units 900 720 1,260
Number of units to be purchased 820 1,340 950
Budgeted cost per unit × $ 60 × $ 60 × $ 60
Budgeted cost of purchases $ 49,200 $ 80,400 $ 57,000

Beginning inventory is last month's ending inventory.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-17

Selling Expense Budget

 Hockey Den pays sales

commissions equal to
10 percent of total sales.
 Hockey Den pays a
monthly salary of $2,000
to its sales manager.

Let’s prepare the sales budget for Hockey Den.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-18

Selling Expense Budget Exh.

23-9

HOCKEY DEN
Selling Expense Budget
October 2005 – December 2005
October November December Total
Budgeted sales $ 100,000 $ 80,000 $ 140,000 $ 320,000
Sales commission % × 10% × 10% × 10% × 10%
Sales commission $ 10,000 $ 8,000 $ 14,000 $ 32,000
Sales manager salary 2,000 2,000 2,000 6,000
Total selling expenses $ 12,000 $ 10,000 $ 16,000 $ 38,000

From Hockey Den’s sales budget

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-19

General and Administrative Expense

Budget

 General and
administrative salaries
are $4,500 per month.
 Depreciation of
equipment is $1,500 per
month.

Let’s prepare the general and administrative

expense budget for Hockey Den.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-20

General and Administrative Expense

Budget Exh.
23-10

HOCKEY DEN
General and Administrative Expense budget
October 2005 – December 2005

October November December Total

Administrative salaries $ 4,500 $ 4,500 $ 4,500 $ 13,500
Equipment depreciation 1,500 1,500 1,500 4,500
Total $ 6,000 $ 6,000 $ 6,000 $ 18,000

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 23-21

Financial Budgets

Cash
Budget Budgeted Budgeted
Expected Income Balance
Receipts Statement Sheet
and
Disbursements

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005

 23-22

Budgeted Cash Receipts

 Forty percent of Hockey

Den’s sales are for cash.
 The remaining sixty
percent are credit sales
that are collected in full
in the month following
sale.

Let’s prepare the cash receipts budget for Hockey Den.

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-23

Budgeted Cash Receipts Exh.

23-12

60 percent of September sales are collected in October

HOCKEY DEN
Cash Receipts Budget
October 2005 – December 2005
September October November December
Budgeted sales $ 70,000 $ 100,000 $ 80,000 $ 140,000
Accounts receivable
Cash receipts from:
Cash sales
Collection of receivables
Total cash receipts

From Hockey Den’s sales budget

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-24

Budgeted Cash Receipts Exh.

23-12

HOCKEY DEN
Cash Receipts Budget
October 2005 – December 2005
September October November December
Budgeted sales $ 70,000 $ 100,000 $ 80,000 $ 140,000
Accounts receivable $ 42,000 $ 60,000 $ 48,000 $ 84,000
Cash receipts from:
Cash sales $ 40,000 $ 32,000 $ 56,000
Collection of receivables
Total cash receipts

40% of sales
60% of sales
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-25

Budgeted Cash Receipts Exh.

23-12

HOCKEY DEN
Cash Receipts Budget
October 2005 – December 2005
September October November December
Budgeted sales $ 70,000 $ 100,000 $ 80,000 $ 140,000
Accounts receivable $ 42,000 $ 60,000 $ 48,000 $ 84,000
Cash receipts from:
Cash sales $ 40,000 $ 32,000 $ 56,000
Collection of receivables 42,000 60,000 48,000
Total cash receipts $ 82,000 $ 92,000 $ 104,000

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 23-26

Cash Disbursements for Purchases

 Hockey Den’s purchases
of merchandise are
entirely on account.
 Full payment is made in
the month following
purchase.
 The September 30
balance of Accounts
Payable is $58,200.
Let’s look at cash disbursements
for purchases for Hockey Den.
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 23-27

Cash Disbursements for Purchases Exh.

23-13

HOCKEY DEN
Cash Disbursements for Purchases
October 2005 - December 2005
October payments (September 30 balance) $ 58,200
November payments (October purchases) 49,200
December payments (November purchases) 80,400

From merchandise purchases budget

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 23-28

Cash Budget
Hockey Den:
 Will pay a cash dividend of $3,000 in November.
 Will purchase $25,000 of equipment in December.
 Has an income tax liability of $20,000 from the
previous quarter that will be paid in October.
 Has a September 30 cash balance of $20,000.
 Has an agreement with its bank for loans at the end
of each month to enable a minimum cash balance of
$20,000.

Continue
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-29

Cash Budget
Hockey Den:
 Pays interest equal to one percent of the prior
month’s ending loan balance.
 Repays loans when the ending cash balance
exceeds $20,000.
 Owes $10,000 on this loan arrangement on
September 30.
 Has 40 percent income tax rate.
 Will pay taxes for current quarter next year.

Let’s prepare the cash budget for Hockey Den.

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 23-30
Exh.
23-11

HOCKEY DEN
Cash Budget
October 2005 - December 2005
October November December
Beginning cash balance $ 20,000
Receipts from customers 82,000 92,000 104,000
Total cash available $ 102,000
Disbursements
Payments for merchandise
Sales commissions
Sales salaries
Administrative salaries
Income taxes
Dividends
From Cash Receipts Budget
Interest
Equipment purchase
Total disbursements
Preliminary balance

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 23-31
Exh.
23-11

HOCKEY DEN
Cash Budget
October 2005 - December 2005
October November December
Beginning cash balance $ 20,000
Receipts from customers 82,000 92,000 104,000
Total cash available $ 102,000
Disbursements
Payments for merchandise $ 58,200 $ 49,200 $ 80,400
Sales commissions
Sales salaries
Administrative salaries
Income taxes
Dividends From Cash Disbursements
Interest for Purchases
Equipment purchase
Total disbursements
Preliminary balance

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 23-32
Exh.
23-11

HOCKEY DEN
Cash Budget
October 2005 - December 2005
October November December
Beginning cash balance $ 20,000
Receipts from customers 82,000 92,000 104,000
Total cash available $ 102,000
Disbursements
Payments for merchandise $ 58,200 $ 49,200 $ 80,400
Sales commissions 10,000 8,000 14,000
Sales salaries 2,000 2,000 2,000
Administrative salaries
Income taxes
Dividends
Interest From Selling Expense Budget
Equipment purchase
Total disbursements
Preliminary balance

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 23-33
Exh.
23-11

HOCKEY DEN
Cash Budget
October 2005 - December 2005
October November December
Beginning cash balance $ 20,000
Receipts from customers 82,000 92,000 104,000
Total cash available $ 102,000
Disbursements
Payments for merchandise $ 58,200 $ 49,200 $ 80,400
Sales commissions 10,000 8,000 14,000
Sales salaries 2,000 2,000 2,000
Administrative salaries 4,500 4,500 4,500
Income taxes
Dividends
Interest
From General and
Equipment purchase Administrative Expense Budget
Total disbursements Depreciation is a
Preliminary balance non-cash expense.
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 23-34
Exh.
23-11

HOCKEY DEN
Cash Budget
October 2005 - December 2005
October November December
Beginning cash balance $ 20,000
Receipts from customers 82,000 Because Hockey
92,000 Den
104,000
Total cash available $ 102,000 maintains a minimum
Disbursements cash balance of $20,000,
Payments for merchandise $ 58,200 the company$ must
$ 49,200 80,400
Sales commissions 10,000 8,000 14,000
borrow $12,800.
Sales salaries 2,000 2,000 2,000
Administrative salaries 4,500 4,500 4,500
Income taxes 20,000
Dividends
Interest
.01 × $10,000 100
Equipment purchase
Total disbursements $ 94,800
Preliminary balance $ 7,200

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 23-35

Cash Budget Continued Exh.

23-11

HOCKEY DEN
Cash Budget
October 2005 - December 2005

October November December

Preliminary balance $ 7,200
Additional borrowing 12,800
Loan repayment
Ending cash balance $ 20,000
Ending loan balance $ 22,800

Ending cash balance for October

is the beginning November balance.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-36
Exh.
23-11

HOCKEY DEN
Cash Budget
October 2005 - December 2005
October November December
Beginning cash balance $ 20,000 $ 20,000
Receipts from customers 82,000 92,000 104,000
Total cash available $ 102,000 $ 112,000
Disbursements
Payments for merchandise $ 58,200 $ 49,200 $ 80,400
Sales commissions 10,000 8,000 14,000
Sales salaries 2,000 2,000 2,000
Administrative salaries 4,500 4,500 4,500
Income taxes 20,000 Cash balance
Dividends 3,000
.01 × $22,800 is sufficient
Interest 100 228
to repay the
Equipment purchase
Total disbursements $ 94,800 $ 66,928
$22,800 loan.
Preliminary balance $ 7,200 $ 45,072

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 23-37

Cash Budget Continued Exh.

23-11

HOCKEY DEN
Cash Budget
October 2005 - December 2005

October November December

Preliminary balance $ 7,200 $ 45,072
Additional borrowing 12,800
Loan repayment (22,800)
Ending cash balance $ 20,000 $ 22,272
Ending loan balance $ 22,800 $ 0

Ending cash balance for November

is the beginning December balance.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-38
Exh.
23-11

HOCKEY DEN
Cash Budget
October 2005 - December 2005
October November December
Beginning cash balance $ 20,000 $ 20,000 $ 22,272
Receipts from customers 82,000 92,000 104,000
Total cash available $ 102,000 $ 112,000 $ 126,272
Disbursements
Payments for merchandise $ 58,200 $ 49,200 $ 80,400
Sales commissions 10,000 8,000 14,000
Sales salaries 2,000 2,000 2,000
Administrative salaries 4,500 4,500 4,500
Income taxes 20,000
Dividends 3,000
Interest 100 228
Equipment purchase 25,000
Total disbursements $ 94,800 $ 66,928 $ 125,900
Preliminary balance $ 7,200 $ 45,072 $ 372

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 23-39

Cash Budget Continued Exh.

23-11

HOCKEY DEN
Cash Budget
October 2005 - December 2005

October November December

Preliminary balance $ 7,200 $ 45,072 $ 372
Additional borrowing 12,800 19,628
Loan repayment (22,800)
Ending cash balance $ 20,000 $ 22,272 $ 20,000
Ending loan balance $ 22,800 $ 0 $ 19,628

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 23-40

Budgeted Income Statement

Cash Budgeted
Budget Income
Statement
t ed
e
pl
om
C

Let’s prepare the budgeted income

statement for Hockey Den.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-41
Exh.
From the Sales Budget 23-14

HOCKEY DEN
Budgeted Income Statement
For Three Months Ended December 31, 2005
Sales (3,200 units @ $100) $ 320,000
Cost of goods sold (3,200 units @ $60) 192,000
Gross profit $ 128,000
Operating expenses:
Sales commissions $ 32,000
Sales salaries 6,000
Administrative salaries 13,500
Equipment depreciation 4,500
Interest expense 328 56,328
Net income before taxes $ 71,672
Income tax expense 28,669
Net income $ 43,003
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-42
Exh.
From the Merchandise 23-14

Purchases Budget
HOCKEY DEN
Budgeted Income Statement
For Three Months Ended December 31, 2005
Sales (3,200 units @ $100) $ 320,000
Cost of goods sold (3,200 units @ $60) 192,000
Gross profit $ 128,000
Operating expenses:
Sales commissions $ 32,000
Sales salaries 6,000
Administrative salaries 13,500
Equipment depreciation 4,500
Interest expense 328 56,328
Net income before taxes $ 71,672
Income tax expense 28,669
Net income $ 43,003
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-43
Exh.
23-14

HOCKEY DEN
Budgeted Income Statement
For Three Months Ended December 31, 2005
Sales (3,200 units @ $100) $ 320,000
Cost of goods sold (3,200 units @ $60) 192,000
Gross profit $ 128,000
Operating expenses:
Sales commissions $ 32,000
Sales salaries 6,000
Administrative salaries 13,500
Equipment depreciation 4,500
Interest expense 328 56,328
Net income before taxes $ 71,672
Income tax expense From the Selling 28,669
Net income Expense Budget $ 43,003
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-44
Exh.
23-14

HOCKEY DEN
Budgeted Income Statement
For Three Months Ended December 31, 2005
Sales (3,200 units @ $100) $ 320,000
Cost of goods sold (3,200 units @ $60) 192,000
Gross profit $ 128,000
Operating expenses:
Sales commissions $ 32,000
Sales salaries 6,000
Administrative salaries 13,500
Equipment depreciation 4,500
Interest expense 328 56,328
Net incomeFrom
before taxes
the General and Administrative $ 71,672
Income tax expense Expense Budget 28,669
Net incomeDepreciation is a non-cash expense. $ 43,003
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-45
Exh.
23-14

HOCKEY DEN
Budgeted Income Statement
For Three Months Ended December 31, 2005
Sales (3,200 units @ $100) $ 320,000
Cost of goods sold (3,200 units @ $60) 192,000
Gross profit $ 128,000
Operating expenses:
Sales commissions $ 32,000
Sales salaries 6,000
Administrative salaries 13,500
Equipment depreciation 4,500
Interest expense 328 56,328
Net income before taxes $ 71,672
Income tax expense 28,669
Net income From the Cash Budget $ 43,003
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-46
Exh.
23-14

HOCKEY DEN
Budgeted Income Statement
For Three Months Ended December 31, 2005
Sales (3,200 units @ $100) $ 320,000
Cost of goods sold (3,200 units @ $60) 192,000
Gross profit $ 128,000
Operating expenses:
Sales commissions $ 32,000
Sales salaries 6,000
Administrative salaries 13,500
Equipment depreciation 4,500
Interest expense 328 56,328
Net income before taxes $ 71,672
Income tax expense $71,672 × .40 28,669
Net income $ 43,003
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-47

Budgeted Balance Sheet

Budgeted Budgeted
Income Balance
Statement Sheet
t ed
e
pl
om
C

Let’s prepare the budgeted balance

sheet for Hockey Den.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-48

Preparing a Budgeted
Balance Sheet
Hockey Den reports the following account
balances on September 30 prior to
preparing its budgeted financial statements:
 Equipment $200,000
 Accumulated depreciation $ 36,000
 Common stock $150,000
 Retained earnings $ 41,800

Let’s prepare the budgeted balance

sheet for Hockey Den.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005
 23-49
Exh.
HOCKEY DEN 23-15

Budgeted Balance Sheet

December 31, 2005
Assets
Cash $ 20,000
Accounts receivable 84,000
Inventory 48,600
Equipment $ 225,000
Less accumulated depreciation 40,500 184,500
Total assets $337,100

Liabilities and Equity

Liabilities
Accounts payable $ 57,000
Income taxes payable 28,669
Bank loan payable 19,628 $105,297
Stockholders' equity
Common stock $ 150,000
Retained earnings 81,803 231,803
Total liabilities and equity $337,100

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 23-50
Exh.
HOCKEY DEN 23-15

Budgeted Balance Sheet

December 31, 2005
Assets
Cash From the Cash Budget $ 20,000
Accounts receivable 84,000
Inventory 48,600
Equipment $ 225,000
Less accumulated depreciation 40,500 184,500
Total assets $337,100

Liabilities and Equity

Liabilities
Accounts payable $ 57,000
Income taxes payable 28,669
Bank loan payable 19,628 $105,297
Stockholders' equity
Common stock $ 150,000
Retained earnings 81,803 231,803
Total liabilities and equity $337,100

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 23-51
Exh.
HOCKEY DEN 23-15

Budgeted Balance Sheet

December 31, 2005
From the Cash Receipts
Assets
Cash Budget $ 20,000
Accounts receivable 84,000
Inventory 48,600
Equipment $ 225,000
Less accumulated depreciation 40,500 184,500
Total assets $337,100

Liabilities and Equity

Liabilities
Accounts payable $ 57,000
Income taxes payable 28,669
Bank loan payable 19,628 $105,297
Stockholders' equity
Common stock $ 150,000
Retained earnings 81,803 231,803
Total liabilities and equity $337,100

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 23-52
Exh.
HOCKEY DEN 23-15

Budgeted Balance Sheet

December 31, 2005
From the Merchandise Purchases Budget
Assets
Cash 8,100 units @ $6 $ 20,000
Accounts receivable 84,000
Inventory 48,600
Equipment $ 225,000
Less accumulated depreciation 40,500 184,500
Total assets $337,100

Liabilities and Equity

Liabilities
Accounts payable $ 57,000
Income taxes payable 28,669
Bank loan payable 19,628 $105,297
Stockholders' equity
Common stock $ 150,000
Retained earnings 81,803 231,803
Total liabilities and equity $337,100

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 23-53
Exh.
HOCKEY DEN 23-15

Budgeted Balance Sheet

December 31, 2005
$200,000 September 30 balance plus the
Assets
Cash$25,000 December acquisition $ 20,000
Accounts receivable 84,000
Inventory 48,600
Equipment $ 225,000
Less accumulated depreciation 40,500 184,500
Total assets $337,100

Liabilities and Equity

Liabilities
Accounts payable $ 57,000
Income taxes payable 28,669
Bank loan payable 19,628 $105,297
Stockholders' equity
Common stock $ 150,000
Retained earnings 81,803 231,803
Total liabilities and equity $337,100

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 23-54
Exh.
HOCKEY DEN 23-15

Budgeted Balance Sheet

December 31, 2005
$36,000 September 30 balance plus the
Assets
Cash $4,500 from the General and $ 20,000
Administrative
Accounts receivable Expense Budget 84,000
Inventory 48,600
Equipment $ 225,000
Less accumulated depreciation 40,500 184,500
Total assets $337,100

Liabilities and Equity

Liabilities
Accounts payable $ 57,000
Income taxes payable 28,669
Bank loan payable 19,628 $105,297
Stockholders' equity
Common stock $ 150,000
Retained earnings 81,803 231,803
Total liabilities and equity $337,100

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 23-55
Exh.
HOCKEY DEN 23-15

Budgeted Balance Sheet

December 31, 2005
Assets
Cash $ 20,000
Accounts receivable 84,000
Inventory 48,600
Equipment From the Merchandise $ 225,000
Less accumulated depreciation 40,500 184,500
Total assets
Purchases Budget $337,100

Liabilities and Equity

Liabilities
Accounts payable $ 57,000
Income taxes payable 28,669
Bank loan payable 19,628 $105,297
Stockholders' equity
Common stock $ 150,000
Retained earnings 81,803 231,803
Total liabilities and equity $337,100

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 23-56
Exh.
HOCKEY DEN 23-15

Budgeted Balance Sheet

December 31, 2005
Assets
Cash $ 20,000
Accounts receivable 84,000
Inventory 48,600
Equipment $ 225,000
Less accumulated
Fromdepreciation
the Budgeted 40,500 184,500
Total assets $337,100
Income Statement
Liabilities and Equity
Liabilities
Accounts payable $ 57,000
Income taxes payable 28,669
Bank loan payable 19,628 $105,297
Stockholders' equity
Common stock $ 150,000
Retained earnings 81,803 231,803
Total liabilities and equity $337,100

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 23-57
Exh.
HOCKEY DEN 23-15

Budgeted Balance Sheet

December 31, 2005
Assets
Cash $ 20,000
Accounts receivable 84,000
Inventory 48,600
Equipment $ 225,000
Less accumulated depreciation 40,500 184,500
Total assets $337,100

From theLiabilities
Cash Budgetand Equity
Liabilities
Accounts payable $ 57,000
Income taxes payable 28,669
Bank loan payable 19,628 $105,297
Stockholders' equity
Common stock $ 150,000
Retained earnings 81,803 231,803
Total liabilities and equity $337,100

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 23-58
Exh.
HOCKEY DEN 23-15

Budgeted Balance Sheet

December 31, 2005
Assets
Cash $ 20,000
Accounts receivable 84,000
Inventory 48,600
Equipment $ 225,000
Less accumulated depreciation 40,500 184,500
Total assets $337,100
Beginning retained earnings $ 41,800
Liabilities and Equity
Add net income 43,003
Liabilities
Deduct
Accounts dividends
payable $ 57,000 (3,000)
Ending
Income retained
taxes payable earnings $ 81,803
28,669
Bank loan payable 19,628 $105,297
Stockholders' equity
Common stock $ 150,000
Retained earnings 81,803 231,803
Total liabilities and equity $337,100

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Activity-Based Budgeting Exh.

23-16

Activity-based budgeting is based on

activities rather than traditional items such as
salaries, supplies, depreciation, and utilities.

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 23-60

End of Chapter 23

McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2005