Question

Techlabs operates a computer training center.The following data relate to the preparation of a master budget for January 2015.

1. At the end of 2014,the company’s general ledger indicated the following balances:

                  Debits                                       Credits

           Cash $ 60,000                     Accounts Payable $ 40,000

Accounts receivable 40,000             Note payable 60,000

Equipment (net) 120,000                   Common stock 30,000

                                                        Retained earnings 90,000

Total   $220,000                                   $220,000

2. Tuition revenue in December 2014 was $80,000,and tuition revenue budgeted for January 2015 is $110,000.

3. Fifty percent of tuition revenue is collected in the month earned,and 50 percent is collected in the subsequent month.The receivable balance at the end of 2014 re?ects tuition earned in December 2014.

4.Monthly expenses (excluding interest expense) are budgeted as follows:salaries,$60,000; rent,$4,000;depreciation on equipment,$8,000;utilities,$2,000;other,$800.

5. Expenses are paid in the month incurred.Purchases of equipment are paid in the month after purchase.The $40,000 payable at the end of 2014 represents money owed for the purchase of computer equipment in December 2014.

6. The company intends to purchase $50,000 of computer equipment in January 2015.The anticipated $8,000 per month of depreciation (see number 4) re?ects the addition of $2,000 of monthly depreciation related to this purchase.

7. The note is at 15 percent per annum and requires monthly interest payments of $750. The payments are made on the 20th of each month.The principal must be paid in February 2016.

8. The tax rate is 35 percent.

Required

Complete the following budgets:

a.

Techlabs Cash Budget For January 2015

Cash receipts

Collection of December 2014 tuition $

Collection of January 2015 tuition

Total cash receipts

Cash disbursements

Payment of salaries

Payment of rent

Payment of utilities

Payment of other expenses

Payment for purchases of computer equipment

Payment of interest on note

Payment of taxes (How do you calculate this?)

Total disbursements

Excess disbursements over receipts

Plus beginning cash balance

Ending cash balance $

b.

Techlabs Budget Income Statement For January 2015

Tuition revenue $

Less:

Salaries

Rent

Utilities

Depreciation

Other

Interest expense

Total expense

Income before taxes

Taxes on income

Net income $

c.

Techlabs Budgeted Balance Sheet As of January 31,2015

Assets

Cash $

Accounts receivable

Equipment (net)

Total assets $

Liabilities

Accounts payable $

Note payable

Total liabilities $

Stockholders’equity

Common stock

Retained earnings

Total stockholders’equity

Total liabilities and stockholders’equity $

Answer 1

Techlabs Cash Budget For January 2015
Cash receipts
Collection of December 2014 tuition $	$    40,000.00
Collection of January 2015 tuition	$    55,000.00
Total cash receipts	$    95,000.00
Cash disbursements
Payment of salaries	$    60,000.00
Payment of rent	$      4,000.00
Payment of utilities	$      2,000.00
Payment of other expenses	$          800.00
Payment for purchases of computer equipment	$    40,000.00
Payment of interest on note	$          750.00
Payment of taxes	$    12,057.50
Total disbursements	$ 119,607.50
Excess disbursements over receipts	$ (24,607.50)
Plus beginning cash balance	$    60,000.00
Ending cash balance	$    35,392.50

Techlabs Budget Income Statement For January 2015
Tuition revenue	$ 110,000.00
Less: Operating Expenses
Salaries	$    60,000.00
Rent	$      4,000.00
Utilities	$     2,000.00
Depreciation	$      8,000.00
Other	$          800.00
Interest expense	$          750.00
Total expense	$    75,550.00
Income before taxes	$    34,450.00
Taxes on income	$    12,057.50
Net income	$    22,392.50

Techlabs Budgeted Balance Sheet As of January 31,2015
Assets
Cash	$    35,392.50
Accounts receivable	$    55,000.00
Equipment (net)	$ 162,000.00
Total assets	$ 252,392.50
Liabilities
Accounts payable	$    50,000.00
Note payable	$    60,000.00
Total liabilities	$ 110,000.00
Stockholders’equity
Common stock	$    30,000.00
Retained earnings	$ 112,392.50
Total stockholders’equity	$ 142,392.50
Total liabilities and stockholders’equity	$ 252,392.50