Question

Macheski Company, an importer and retailer of Polish pottery and kitchenware, prepares a monthly master budget. Data for the July master budget are given below:

The June 30th balance sheet follows:

Cash                                        $ 25,000                      Accounts payable             $ 45,000

Accounts receivable               110,000                      Capital stock             300,000

Inventory                                    54,000                      Retained earnings                94,000

Building and equipment (net) 250,000

Actual sales for June and budgeted sales for July, August, and September are given below:

June                                         $137,500

July                                           360,000

August                                       400,000

September                                 320,000

Sales are 20 percent for cash and 80 percent on credit. All credit sales are collected in the month following the sale. There are no bad debts.

The gross margin percentage is 40 percent of sales. The desired ending inventory is equal to 25 percent of the following month's COGS. One fourth of the purchases are paid for in the month of purchase and the others are purchased on account and paid in full the following month.

The monthly cash operating expenses are $43,000, and the monthly depreciation expenses are $7,000.

8. Refer to Figure 8-7. What is the balance of the accounts receivable at the end of July?

a. $110,000

b. $288,000

c. $360,000

d. $398,000

9. Refer to Figure 8-7. What is the balance of the accounts payable at the end of July?

a. $55,500

b. $93,000

c. $120,000

d. $166,500

10. Refer to Figure 8-7. What is the balance of the inventory account at the end of July?

a. $54,000

b. $60,000

c. $124,000

d. $216,000

11. Refer to Figure 8-7. What is the balance of the building and equipment (net) account at the end of July?

a. $243,000

b. $250,000

c. $257,000

d. $300,000

13. Refer to Figure 8-7. What is the balance of the cash account at the end of July?

a. $8,500

b. $15,500

c. $62,500

d. $114,000

14. Refer to Figure 8-7. What are the total assets at the end of July?

a. $439,000

b. $446,500

c. $515,500

d. $653,500

Answer 1

8. Option B

the balance of the accounts receivable at the end of July = 80% of July Sales = 80% * 360000 = $288000

9. Option D.

Purchases for the Month of July = COGS + Closing Inventory - Opening Inventory

Purchases for the Month of July = $360000 * 60% + $400000 * 60% * 25% - $54000

Purchases for the Month of July = $216000 + $60000- $54000 = $222000

Accounts payable for the month of july = $222000 * 3 / 4 = $166500

10. Option B

Balance of Inventory account in July = August sales * 60% * 25% = $400000 * 60% * 25% = $60000

11. Option A

Building and Equip. balance = Book Value - Depreciation = $250000 - $7000 = $243000

13. Option C.

Cash Account Balance = Opening Balance + Collections from customers - payments to supplies - operating expenses

Cash Account Balance = $25000 + $110000 + $72000 - $45000 - $55500 - $43000 =$62500

14. Option D.

Total Assets at the end of July = Inventory + Cash + AR + Building

Total Assets at the end of July = $60000 + $62500 + $288000 + $243000

Total Assets at the end of July = $653500