Question

Petesy Corporation is preparing its Master Budget for 2019. Budget information is as follows:

                                                        Sales                      Production Cost                                Operating Expenses

2019               1^st Quarter          P280,000              P192,000                              P64,000

                        2^nd Quarter         320,000               200,000                                  68,000

                        3^rd Quarter          360,000               224,000                                  72,000

                        4^th Quarter          352,000               200,000                                  76,000

2020               1^st Quarter          320,000               224,000                                  72,000

The budgeted Finished Goods Inventories are:

        2018       March 31             P56,000

                        June 30                 52,000

                        September 30      60,000

                        December 31     48,000

The company uses the JIT system on its purchase of materials. It buys materials on cash basis.

Included in the production cost each quarter is P44, 000 in depreciation. The operating expenses include depreciation of P12,000 per quarter. All production costs and operating expenses, with the exemption of depreciation are to be paid during the quarter of incurrence.

Collections on sales are planned at 60% during the quarter of sales, the balance during the quarter following the sale. Dividends of P20,000 is to be paid in June and again in December if covered by sufficient profits. No dividends will be paid if the net profit is less than P120,000.

Income Tax is equal to 32 of the quarter’s income before tax and is paid in the following quarter.

The Statement of Financial Position as of December 31, 2018 is as follows:

                                                                Petesy Corporation

                                                        Statement of Financial Position

                                                                  December 31, 2018

Assets                                                                                                                           Equities

Cash                                              P76,000 Income tax payable        P 12,000

Accounts Receivable              120,000

Inventory                                    44,000                  Share Capital                      640,000

Plant and Equipment              580,000 Retained Earnings            168,000

Total                                              820,000 Total                                      P820,000

1. How much was the actual sales during the last quarter of 2018?
2. What is the total budgeted cost of goods sold for the year 2019?
3. How much dividends will be paid in 2019?
4. What is the total budgeted cash disbursements for production costs and operating expenses for the year 2019?
5. What is the budgeted cash balance on December 31, 2019?
6. What is the expected balance of accounts receivable as of December 31, 2019?
7. What is the budgeted balance of raw materials inventory as of December 31, 2019?
8. What is the expected balance of Income tax payable as of December 31, 2019?
9. What is the budgeted balance of Retained Earnings as of December 31, 2019?
10. What is the expected balance of the plant and equipment account as of December 31, 2019?
11. If a budgeted statement of financial position as at December 31, 2019 is to be prepared, total assets will be how much?

  

Answer 1

1. ACTUAL SALES DURING LAST QTR OF 2018

120000/40% = 300000/-

2. TOTAL BUDGETED COST OF GOODS SOLD IN 2019

WITH DEPRECIATION 816000/-

WITHOUT DEPRECIATION 640000/-

3. DIVIDEND PAID IN 2019

20000+20000 = 40000/-

4. TOTAL CASH DISBURSEMENT FOR PRODUCTION COST AND OPERATING COST IN 2019

640000+232000 = 872000/-

5. BUDGETED CASH BALANCE IN 2019

OPENING BALANCE IN 2019 76000/-

ADD. COLLECTION FROM SALES OF 2018 120000/-

ADD. COLLECTION FROM SALES IN 2019 1171200/-

LESS PRODUCTION COST AND OPERATING EXPENCES PAID 872000/-

LESS INCOME TAX PAID 61440+12000 73440/-

LESS DIVIDEND PAID 40000/-

NET BUDGETED CASH BALANCE IN 2019 381760/-

6. EXPECTED BALANCE OF ACCOUNT RECEIVABLE OF 2019

352000 X 40% = 140800/-

7. INCOME TAX PAYABLE OF 2019 = 7680/-

8. BUDGETED BALANCE OF RETAIN EARNING OF 2019

168000+146880 (PROFIT OF CURRENT YEAR) - 40000 (DIVIDEND) = 274880/-

9. EXPECTED BALANCE OF PLANT AND EQUIPMENT ACCOUNT

580000 - 44000X4 - 12000X4 = 356000/-

10. TOTAL ASSESTS AS ON DEC 2019

CASH 381760/-

ACCOUNT RECEIVALBE 140800/-

INVENTORY 43920/-

  PLANT AND EQUIPMENT   356000/-

TOTAL 922480/-