Question

Forest Trails is preparing their budgeted financial statements for the coming period, and has accumulated the following data:

Beginning-of-period balances:

Cash: $13,500

Accounts Receivable: $54,000

Raw Materials Inventory: $16,000

Work in Process Inventory: $60,000

Finished Goods Inventory: $24,000

Equipment (historical value): $480,000

Accumulated Depreciation: $288,000

Accounts Payable: $27,000

Estimates for end-of-period balances:

Accounts Receivable: $67,500

Raw Materials Inventory: $10,000

Work in Process Inventory: $50,000

Finished Goods Inventory: $29,000

Accumulated Depreciation: $296,000

Accounts Payable: $18,000

Budgeted activity levels for the period:

Sales: 3,125 units, at an average sales price of $80/unit

Purchases of Direct Materials: $44,800

Direct Labor Wages: $75,000

Manufacturing Overhead: $25,000

Selling and Administrative Expenses: $42,000

All sales are on account. Only raw materials are purchased on account. The company has no debt aside from current liabilities. Forest Trails has planned to purchase new equipment worth $25,000, and to sell equipment for $8,000 (Original purchase price $15,000, accumulated depreciation $10,000) to help finance the purchase.

A. What  is budgeted amount of Cost of Goods Sold for the period?

B. What is budgeted amount of cash received from customers for the period?

C. What is the budgeted level of Cash Flow from Operating Activities?

Answer 1

Note: It is assumed that the Manufacturing OH includes all the manufacturing overheads including depreciation.

2
Budgeted Amount of cash received from customers
Opening Balance of Accounts Receivables	54000
Add: Sales (3125 units * 80)	250000
Less: Closing Balance of Accounts Receivables	67500
Budgeted cash received from customers	236500
Since all sales are on account and no bad debt or Sales Return is given in the question, the opening balance of Accounts Receivables + Total Sales will give the Total Receivables. When this amount is reduced by the Closing Balance of Receivables we will get the Cash Received from the customers.

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