Questions
Problem A, Income Taxes Harms Way Company (HWC) provides you with the following information for the...

Problem A, Income Taxes Harms Way Company (HWC) provides you with the following information for the year ended October 31, 2020. Your assignment is to calculate income tax expense, income taxes payable, and deferred income tax assets/liabilities. The end result will be a journal entry to record all of that. In addition, you must calculate HWC’s effective tax rate and prepare a reconciliation to the federal statutory rate of 21%. You can explain the difference in words, if you wish.

Information provided:

1. Income before tax, as shown on HWC’s GAAP statement of income = $2,440,000

2. Depreciation calculated under GAAP = $300,000. Depreciation as will be shown on the tax return = $475,000.

3. Interest income on municipal bonds, which is not subject to federal income tax = $150,000.

4. Fines recorded and paid during the year to the EPA for environmental violations = $450,000. Fines are not tax deductible.

5. Meals and entertainment expenses recorded during the year = $375,000. Only one-half (50%) of those expenses may be deducted for tax purposes.

6. At the end of the fiscal year (in October 2020), HWC received a payment of $750,000 from a client for a product to be delivered in November 2020. Under the tax law, that payment is taxable when received, not when the product is delivered.

Your Assignment: Calculate:

1. Income tax expense (GAAP).

2. Income taxes currently payable.

3. Deferred income taxes resulting from this year’s operations.

Be sure to show your work, I give partial credit (full credit, too, of course), but I must be able to see how you calculated amounts used in your answer

In: Accounting

Modern Services sells various components to maintain on-shore rigs and derricks. The company has just approached...

Modern Services sells various components to maintain on-shore rigs and derricks. The company has just approached Linden State Bank requesting a $300,000 loan to strengthen the Cash account and to pay certain pressing short-term obligations. The company’s financial statements for the most recent two years follow:
MODERN SERVICES
Comparative Balance Sheet
Assets This Year       Last Year
Current assets:
   Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 90,000       $ 200,000
   Marketable Securities . . . . . . . . . . . . . . . . . .     0       50,000
   Accounts Receivable, net . . . . . . . . . . . . . . . .     650,000       400,000
   Inventory . . . . . . . . . . . . . . . . . . . . . . . . . 1,300,000       800,000
   Prepaid Expenses . . . . . . . . . . . . . . . . . . . . 20,000       20,000
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . 2,060,000       1,470,000
Plant and equipment, net . . . . . . . . . . . . . . . . . . . . 1,940,000       1,830,000
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000,000       3,300,000

Liabilities and Stockholders’ Equity
Liabilities:
   Current Liabilities . . . . . . . . . . . . . . . . . . . . $ 1,100,000       $ 600,000
   Bonds Payable, 12% . . . . . . . . . . . . . . . . . . 750,000       750,000
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 1,850,000       1,350,000  
Stockholders’ Equity:
   Preferred Stock, $50 par, 8% . . . . . . . . . . . . . 200,000       200,000
   Common Stock, $10 par . . . . . . . . . . . . . . . .    500,000       500,000
   Retained Earnings . . . . . . . . . . . . . . . . . . . 1,450,000       1,250,000
Total Stockholders’ Equity . . . . . . . . . . . . . . . . . . . 2,150,000       1,950,000
Total Liabilities and Stockholders’ Equity . . . . . . . . . . . 4,000,000       3,300,000

MODERN SERVICES
Comparative Income Statement
Assets This Year       Last Year
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,000,000   $ 6,000,000
Less cost of goods sold . . . . . . . . . . . . . . . . . . . . . .   5,400,000       4,800,000
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . .   1,600,000       1,200,000
Less operating expenses . . . . . . . . . . . . . . . . . . . . .     970,000       710,000
Net Operating income . . . . . . . . . . . . . . . . . . . . . .     630,000       490,000
Less interest expense . . . . . . . . . . . . . . . . . . . . . . .     90,000       90,000
Net income before taxes . . . . . . . . . . . . . . . . . . . . .     540,000       400,000
Less income taxes (40%) . . . . . . . . . . . . . . . . . . . . .     216,000       160,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . .     324,000       240,000
Dividends paid:
   Preferred dividends . . . . . . . . . . . . . . . . . . .     16,000       16,000
   Common dividends . . . . . . . . . . . . . . . . . . . .   108,000       60,000
Total dividends paid . . . . . . . . . . . . . . . . . . . . . . . .     124,000       76,000
Net income retained . . . . . . . . . . . . . . . . . . . . . . . .     200,000       164,000
Retained earnings, beginning of year . . . . . . . . . . . . . . .   1,250,000       1,086,000
Retained earnings, end of year . . . . . . . . . . . . . . . . . . $ 1,450,000   $ 1,250,000

During the past year, the company has explained the number of lines that is carries in order to stimulate sales and increase profits. It has also moved aggressively to acquire new customers. Sales terms are 2/10, n/30/. All sales are on account.

                Assume that the following ratios are typical of firms in the building supply industry:

                                Current ratio . . . . . . . . . . . . . . . . . . .       2.5 to 1

                                Acid-test ratio . . . . . . . . . . . . . . . . . .      1.2 to 1

                                Average age of receivables . . . . . . . . . . .     18 days

                                Inventory turnover in days . . . . . . . . . . .     50 days

                                Debt-to-equity ratio . . . . . . . . . . . . . . .     0.75 to 1

                                Times interest earned . . . . . . . . . . . . . .    6.0 times

                                Return on total assets . . . . . . . . . . . . . .    10%

                                Price-earnings ratio . . . . . . . . . . . . . . .      9

                                Net income as a percentage of sales . . . . . . 4%

  1. Linden State Bank is uncertain whether the loan should be made. To assist it in making a decision, you have been asked to compute the following ratios for both this year and last year:
    1. The amount of working capital
    2. The current ratio
    3. The acid-test ratio
    4. The average age of receivables. (The accounts receivable at the beginning of last year totaled $350,000)
    5. The inventory turnover in days. (The inventory at the beginning of last year totaled $720,000)
    6. The debt-to-equity ratio
    7. The number of times interest was earned
  2. For both this year and last year (carry computations to one decimal place)
    1. Present the balance sheet in common-size form              
    2. Present the income statement in common-size form down through net income
  3. From your analysis in (1) and (2) above, what problems or strengths do you see existing in Modern Services? Make a recommendation as to whether the loan should be approved.

In: Accounting

What do you think about the way in which Starbucks versus Coffee Bean taxes customers on...

What do you think about the way in which Starbucks versus Coffee Bean taxes customers on the purchase of coffee?

In: Accounting

MIKE’S QUALITY REPAIR SERVICES Accounting 101 Term Project In this project, you will use the concepts...

MIKE’S QUALITY REPAIR SERVICES

Accounting 101 Term Project

In this project, you will use the concepts you have learned in Chapters 1 – 6 to complete the accounting functions for a business for a single month. You will start with the initial investment of cash in the business, and end the month by preparing the month-end adjustments and financial statements. The purpose of this project is to bring together the concepts that you have learned so far in this class, and see how all of the pieces fit together.

CHART OF ACCOUNTS

Assets Revenue

111 Cash 411 Income from Services

112 Accounts Receivable

114 Supplies Expenses

116 Prepaid Insurance 511 Advertising Expense

121 Office Equipment 512 Supplies Expense

122 Accum. Depr., Office Equipment 513 Insurance Expense

123 Tools 514 Utilities Expense

124 Accum. Depr., Tools 515 Salaries Expense

125 Truck 516 Truck Expense

521 Depreciation Expense - Office Equipment

Liabilities 522 Depreciation Expense - Tools

211 Accounts Payable

Owner’s Equity

311 Mike Hammer, Capital

312 Mike Hammer, Drawing

330 Income Summary

Instructions

Download the Excel file found in Canvas, Mike’s Quality Repair Services.xlsx. You will complete all work for this assignment in that file, and upload it to Canvas when completed.

Journalize the transactions for the month of January, 2018, beginning on page GJ1. Be sure and list the Debit Account(s) first; Credit Account(s) next. Write a brief explanation for each transaction, and skip a line in-between transactions.

Post the journal entries to the general ledger accounts. Be sure and use the Post Reference #s for each posting. (Hint: the balance of the cash account after all journal entries have been posted should be $9,915).

Prepare the Trial Balance section of the worksheet.

Prepare the Adjustments section of the worksheet.

Compute and record the adjustment for supplies used during the month. An inventory showed supplies on hand of $250.

One month insurance has been used up.

Record the adjustment for depreciation of Office Equipment of $85 for the month.

Record the adjustment for depreciation of Tools of $125 for the month.

Complete the worksheet.

Prepare an Income Statement, Statement of Owner’s Equity, and Balance Sheet for the month. Be sure to add the date to each financial statement.

Journalize and post the Adjusting entries.

Journalize and post the Closing entries.

Prepare a Post-closing Trial Balance.

Transactions for the month:

You made the following transactions for Mike’s Quality Repair Services during the month of January:

Jan. 1 Invested $15,000 cash, and a truck with a fair market value of $8,500 into the business.

3 Paid $1800 to Liberty Mutual for a 1-year insurance policy. The policy is effective immediately. Ck# 1001

4 Bought tools from Sears on account, $7500, Inv. #X-1357

5 Bought computer system from Ben’s Computer Center, $5000, putting $2500 down and putting the balance on account, Ck. #1002, Inv. #Y-4152.

6 Bought supplies-Office Mart, $850, Ck. #1003.

7 Performed services for cash, $1,650.

10 Performed services on account, $1275.

12 Received and paid telephone bill, $420, ck#1004.

13 Bought supplies on account from Office Mart, $900, Inv. AB1477.

15 Received and paid the utility bill, $600, Ck. #1005.

15 Paid salary for office clerk, 1/1-1/15-$1000, Ck# 1006.

20 Received The Times Review bill for advertising for the month, $410, Inv. #TR198.

(Note that you did not PAY the bill – you only received it).

21 Performed services $7,250, received $2,250 cash, with the balance due in 30 days.

27 Received from clients $1,275, for work completed on January 10.

28 Paid for oil change on truck, $90, ck#1007.

29 Withdrew cash for personal use, $1500, Ck. #1008.

30 Paid salary for office clerk, 1/16-1/30, $1000, ck#1009.

30 Made partial payment of $500 to Office Mart for supplies purchased on January 13th, Ck#1010.

In: Accounting

TechMaster is an information technology (IT) consulting company offering services to small firms. TechMaster bills clients...

TechMaster is an information technology (IT) consulting company offering services to small firms. TechMaster bills clients for its various services based on the hours its professionals spend. In August, IT professionals billed 880 hours to clients and worked a total of 930 hours (the difference includes time for training, preparing bids, and so on, which are considered administrative costs). TechMaster bills clients at the rate of $210 per hour; labor cost for its IT professionals is $80 per hour. Overhead costs in August totaled $36,000. Overhead is applied to clients at $46 per labor-hour. In addition, TechMaster had $56,000 in marketing and administrative costs (including labor time as described). All transactions are on account. All services were billed.

Transaction Description
(a) Record Labor cost
(b) Record Applied Service Overhead
(c) Record Cost of services billed
(d) Record Actual Service Overhead

Required:

a. Show labor and overhead cost flows through T-accounts.

b. Prepare an income statement for the company for August.

In: Accounting

DeLuxe Limo Service has the following information for March. Sales revenue $ 310,000 Variable costs of...

DeLuxe Limo Service has the following information for March.

Sales revenue $ 310,000
Variable costs of operations, excluding labor costsa 93,000
Employee wages and salariesb 106,000
Manager salariesc 38,000
Fixed cost of automobilesd 31,000
Building costs (rent, utilities, etc.)e 18,500

a 5 percent of this cost was wasted due to poor directions given to limo drivers.

b 5 percent of this cost was for time spent by limo drivers because of poor directions.

c 10 percent of this cost was time taken to address customer complaints.

d The limos have 40 percent unused capacity.

e The building has 10 percent unused capacity

a. Using the traditional income statement format, prepare a value income statement. (Loss amounts should be indicated with a minus sign.)

DELUXE LIMO SERVICE
Value Income Statement
For the Month Ending March 31
Nonvalue-added Activities Value-added Activities Total
Sales revenue
Cost of services sold:
Variable costs of operations, excluding labor costs
Employee wages and salaries
Fixed cost of automobiles
Gross margin (loss)
Administrative expenses:
Manager salaries
Building costs
Operating income (loss)

What value would there be to the managers at DeLuxe from preparing the same information in April?

A. Preparing a April statement helps DeLuxe see whether he is improving in reducing nonvalue-added activities.

B. Preparing a April statement helps DeLuxe see whether he is improving in reducing value-added activities.

In: Accounting

Do Hackers Really Matter? What are the advantages and disadvantages, from a cost perspective, of deciding...

Do Hackers Really Matter? What are the advantages and disadvantages, from a cost perspective, of deciding that attempts to secure an organization’s network are not worth the increased cost?

In: Accounting

Complete all steps in accounting cycle. (LO 1, 2) AP Laura Eddy opened Eddy's Carpet Cleaners...

Complete all steps in accounting cycle.

(LO 1, 2) AP

Laura Eddy opened Eddy's Carpet Cleaners on March 1, 2017. In March, the following transactions were completed:

Mar. 1

Laura invested $10,000 cash in the business.

1

Purchased a used truck for $6,500, paying $1,500 cash and signing a note payable for the balance.

3

Purchased supplies for $1,200 on account.

5

Paid $1,200 on a one-year insurance policy, effective March 1.

12

Billed customers $4,800 for cleaning services.

18

Paid $500 of amount owed on supplies.

20

Paid $1,800 for employee salaries.

21

Collected $1,400 from customers billed on March 12.

25

Billed customers $2,500 for cleaning services.

31

Paid $375 for fuel for the month on the truck.

31

Withdrew $900 cash for personal use.

Instructions

(a)  

Journalize and post the March transactions.

(b)  

Prepare a trial balance at March 31.

(c)  Journalize and post the following adjustments:

  • 1.The truck has an estimated useful life of five years.
  • 2.One twelfth of the insurance expired.
  • 3.An inventory count shows $400 of supplies on hand at March 31.
  • 4.Accrued but unpaid employee salaries were $500.
  • 5.The note payable has a 4.5% annual interest rate.
  • 6.Earned but unbilled fees at March 31 were $500.

(d)  

Prepare an adjusted trial balance.

(e)  

Prepare the income statement and statement of owner's equity for March, and a classified balance sheet at March 31, 2017. Of the note payable, $2,000 must be paid by March 1, 2018.

(f)  

Journalize and post the closing entries.

(g)  

Prepare a post-closing trial balance at March 31.

In: Accounting

Problem 8-4A Preparing a bank reconciliation and recording adjustments P3 Images Missing The following information is...

Problem 8-4A Preparing a bank reconciliation and recording adjustments P3 Images Missing The following information is available to reconcile Branch Company’s book balance of cash with its bank statement cash balance as of July 31, 2017. On July 31, the company’s Cash account has a $27,497 debit balance, but its July bank statement shows a $27,233 cash balance. Check No. 3031 for $1,482 and Check No. 3040 for $558 were outstanding on the June 30 bank reconciliation. Check No. 3040 is listed with the July canceled checks, but Check No. 3031 is not. Also, Check No. 3065 for $382 and Check No. 3069 for $2,281, both written in July, are not among the canceled checks on the July 31 statement. In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that Check No. 3056 for July rent expense was correctly written and drawn for $1,270 but was erroneously entered in the accounting records as $1,250. The July bank statement shows the bank collected $8,000 cash on a noninterest-bearing note for Branch, deducted a $45 collection expense, and credited the remainder to its account. Branch had not recorded this event before receiving the statement. The bank statement shows an $805 charge for a $795 NSF check plus a $10 NSF charge. The check had been received from a customer, Evan Shaw. Branch has not yet recorded this check as NSF. The July statement shows a $25 bank service charge. It has not yet been recorded in miscellaneous expenses because no previous notification had been received. Branch’s July 31 daily cash receipts of $11,514 were placed in the bank’s night depository on that date but do not appear on the July 31 bank statement. Check (1) Reconciled balance, $34,602; (2) Cr. Notes Receivable, $8,000 Required Prepare the bank reconciliation for this company as of July 31, 2017. Prepare the journal entries necessary to bring the company’s book balance of cash into conformity with the reconciled cash balance as of July 31, 2017.

In: Accounting

For your main Discussion post, list at least one of each transaction related to all of...

For your main Discussion post, list at least one of each transaction related to all of the following business events:

  1. Purchase of goods or services for cash
  2. Providing services for cash
  3. Providing services on account
  4. Purchase of goods or services on account
  5. Payment of a previously recorded expense
  6. Receipt of a previously recorded revenue earned

Be sure to explain your logic in the analysis of your business transactions and do not repeat examples from the textbook. Also, list the type of source documents that may serve as evidence for each accounting transaction. Here is an example of a purchase of goods for cash:

My Company purchased $1,000 of supplies during the current accounting period; payment was made at the time of purchase. The source I would need is a sales receipt from the company from which I purchased the supplies.

Additionally, for each business transaction presented, answer these questions:

  1. Which accounts are affected for each transaction?
  2. How is each account affected (debit or credit, increase or decrease), specifically?

In: Accounting

Problem 15-5A Long-term investment transactions; unrealized and realized gains and losses LO C2, P3, P4 [The...

Problem 15-5A Long-term investment transactions; unrealized and realized gains and losses LO C2, P3, P4 [The following information applies to the questions displayed below.] Stoll Co.’s long-term available-for-sale portfolio at December 31, 2016, consists of the following. Available-for-Sale Securities Cost Fair Value 65,000 shares of Company A common stock $ 1,045,600 $ 930,000 40,000 shares of Company B common stock 350,750 340,000 40,000 shares of Company C common stock 1,381,500 1,329,875 Stoll enters into the following long-term investment transactions during year 2017. Jan. 29 Sold 20,000 shares of Company B common stock for $174,375 less a brokerage fee of $3,100. Apr. 17 Purchased 22,000 shares of Company W common stock for $475,000 plus a brokerage fee of $3,700. The shares represent a 30% ownership in Company W. July 6 Purchased 14,000 shares of Company X common stock for $261,125 plus a brokerage fee of $3,700. The shares represent a 12% ownership in Company X. Aug. 22 Purchased 100,000 shares of Company Y common stock for $650,000 plus a brokerage fee of $8,500. The shares represent a 51% ownership in Company Y. Nov. 13 Purchased 18,000 shares of Company Z common stock for $525,800 plus a brokerage fee of $6,500. The shares represent a 5% ownership in Company Z. Dec. 9 Sold 65,000 shares of Company A common stock for $1,030,500 less a brokerage fee of $4,100. The fair values of its investments at December 31, 2017, are: B, $170,750; C, $1,228,625; W, $390,500; X, $244,250; Y, $1,070,500; and Z, 565,600. Problem 15-5A Part 3 3. What amount of gains or losses on transactions relating to long-term investments in available-for-sale securities should Stoll report on its December 31, 2017, income statement?

In: Accounting

On December 1, 2015 John Trap created a new travel agency, Trap Adventures, Inc. providing exclusive...

On December 1, 2015 John Trap created a new travel agency, Trap Adventures, Inc. providing exclusive adventure trips. The following transactions occurred during December 2015. (NOTE: There are no beginning balances – this is a new company.) Dec 1 John Trap invested $60,000 cash in the company for common stock. 2 Purchase office equipment for $17,500 cash. 2 The company rented furnished office space by paying $18,000 cash for the first six months (December 2015 - May 2016) rent. 3 The company purchased $1,500 of office supplies on account. 10 The company paid $3,600 cash for the premium on a 12-month insurance policy. 14 The company paid $10,750 cash for two weeks' salaries earned by employees. 24 The company collected $54,000 cash on commissions from airlines on tickets obtained for customers. 28 The company paid $12,125 cash for two weeks' salaries earned by employees. 29 The company paid $350 cash for minor repairs to the company's computer. 30 The company paid $450 cash for this month's telephone bill. 30 Dividends of $3,000 cash were paid. Final Project Requirements Using the spreadsheet found here and information above, complete the following: Adjustment Data: One month's insurance coverage has expired. The company occupied the office space for the month of December. At the end of the month, $600 of office supplies are still available. Create journal entries to record the transactions that occurred during the month of December. (Completed in Unit 3) Prepare an unadjusted trial balance (Completed in Unit 3) Create adjusting journal entries at the end of the year, December 31 based on the adjustment data. Prepare an adjusted trial balance. Prepare an income statement, statement of stockholders' equity, and classified balance sheet. Create closing journal entries to close all temporary accounts. Prepare post-closing trial balance. In addition, answer TWO of the questions below in 1-2 fully developed paragraphs. A fully developed paragraph should have a major point with 3 to 5 support sentences. One or two sentences is not acceptable or does not discuss the question. Be sure to show what you know!!! Trap Adventures, Inc. is looking for an accountant. In your own words, explain to Trap's hiring team the role of accountant and accounting within business. Provide examples of the expectations of the accountant. Discuss the financial position of Trap Adventures, Inc. using the following ratios: Current ratio Return on equity: For each ratio, provide the calculation and an explanation of the meaning. Is this a positive or negative result for the Trap Adventures, Inc.? Using Trap Adventures, Inc.'s income statement, evaluate the operations for the month of December. Complete a common-size income statement using sales as the base number. What is the largest percentage? What is the smallest percentage? What recommendations could be made to increase Trap's net income? Currently, Trap Adventures, Inc. does not own any loans or bank notes (long-term liabilities). What would happen if Trap decides to obtain a bank loan for $25,000 to fund daily operations? How would this transaction impact the financial statements - which accounts would be affected? What is the debt to equity ratio? What does the debt to equity ratio represent

In: Accounting

On January 1, 2019, Sharon Matthews established Tri-City Realty, which completed the following transactions during the...

On January 1, 2019, Sharon Matthews established Tri-City Realty, which completed the following transactions during the month:

Jan. 1 Sharon Matthews transferred cash from a personal bank account to an account to be used for the business, $30,000.
2 Paid rent on office and equipment for the month, $2,450.
3 Purchased supplies on account, $2,200.
4 Paid creditor on account, $850.
5 Earned fees, receiving cash, $14,940.
6 Paid automobile expenses (including rental charge) for month, $1,580, and miscellaneous expenses, $470.
7 Paid office salaries, $2,000.
8 Determined that the cost of supplies used was $1,100.
9 Withdrew cash for personal use, $3,200.

Required:

1. Journalize entries for transactions Jan. 1 through 9. Refer to the Chart of Accounts for exact wording of account titles.
2. Post the journal entries to the T accounts, selecting the appropriate date to the left of each amount to identify the transactions. Determine the account balances after all posting is complete. Accounts containing only a single entry do not need a balance.
3. Prepare an unadjusted trial balance as of January 31, 2019.
4. Determine the following:
a. Amount of total revenue recorded in the ledger.
b. Amount of total expenses recorded in the ledger.
c. Amount of net income for January.
5. Determine the increase or decrease in owner’s equity for January.

In: Accounting

The amounts of the assets and liabilities of Nordic Travel Agency at December 31, 2019, the...

The amounts of the assets and liabilities of Nordic Travel Agency at December 31, 2019, the end of the year, and its revenue and expenses for the year follow. The capital of Ian Eisele, owner, was $650,000 on January 1, 2019, the beginning of the year. During the year, Ian withdrew $36,000.

Accounts

Amounts

Accounts payable $68,000
Accounts receivable 267,000
Cash 183,000
Fees earned 897,600
Land 544,000
Miscellaneous expense 6,200
Rent expense 35,000
Supplies 5,200
Supplies expense 4,200
Utilities expense 27,000
Wages expense 508,000
Required:
1. Prepare an income statement for the year ended December 31, 2019.*
2. Prepare a statement of owner’s equity for the year ended December 31, 2019.*
3. Prepare a balance sheet as of December 31, 2019.*
4. What item appears on both the statement of owner’s equity and the balance sheet?
* Refer to the information given and the lists of Accounts, Labels, and Amount Descriptions provided for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. If a net loss is incurred or there is a decrease in owner’s equity, enter that amount as a negative number using a minus sign.

In: Accounting

Rosewood Guitar, Inc. is preparing it cash receipts schedule for the 1stquarter ending 20x1.  In doing so,...

Rosewood Guitar, Inc. is preparing it cash receipts schedule for the 1stquarter ending 20x1.  In doing so, its budget director prepared the following budgeted sales schedule:

Rosewood Guitar Company

Sales Budget

For the Quarter Ending March 31, 20x1

January

February

March

Budgeted sales

$185,000

$195,000

$225,000

Addition Information:

  • Sales for the prior November and December 200x0 were $150,000 and $165,000, respectively.
  • 55% of sales are for cash, the remaining 45% are credit sales.
    • Credit sales are collected as follows:
      • 15% in the month of sale
      • 65% in the month following the sale, and the remaining
      • 15% in the second month following the sale.
  • The company estimates that the remainder of credit sales will be uncollectible.

Required

  1. Prepare a cash receipts schedule for the first quarter of 20x1. (Please show your detailed schedule)
  2. What is the total amount of uncollected accounts receivable for the 3-month period, January, February and March?
  3. Briefly, provide the definition for the term “budgetary slack.”  Why does, budgetary slack occur?
  4. What is the primary indication that “budgetary slack” is occurring?

In: Accounting