ABCD Corp prepares its master budget on a quarterly basis and has a September 30 year end. The following data and information has been prepared to help you prepare the master budget for the first quarter of the fiscal year (October thru December). Info provided as follows:

1.

Actual Sales for September, 2019 and projected sales for October, November and December, 2019 and January 2020 are as follows:

September $280,000

October $400,000

November $600,000

December $1,800,000

January $700,000

2.

Monthly sales are 32% on cash and 68% on credit. Customer payments on credit sales are collected as follows: 27% in the month of sale and 73% in the month following the month of sale.

3.

At September 30 ABCD Corp had outstanding accounts receivable of $190,400 and are a result of September credit sales. This amount will be collected as follows: 100% in October.

4.

ABCD Corp’s Gross Profit Percentage is 63%. Therefore Cost of Goods Sold comprise 37% of monthly sales.

5.

Monthly Expenses are budgeted as follows. All expense amounts are paid in the month they are incurred.

a. Sales and Wages: $31,000 per month

b. Advertising: $74,000 per month

c. Shipping: 7% of Sales

d. Miscellaneous Expenses: $10,000 + 6% of sales

6.

Depreciation Expense is expected to be $42,000 each quarter.

7.

ABCD’s Ending Inventory at September 30 is $44,400. Ending Inventory for October, November and December should equal 30% of the following month’s Cost of Goods Sold.

8.

60% of inventory purchases are paid for in the month of purchase; the remaining 40% paid for in the following month. At September 30 the Company still owed $72,000 to vendors for their September inventory purchases---this amount will be paid in October.

9.

During October, the company plans to purchase a new copy machine for $200,000 cash. During December, other equipment will be purchased for cash at a cost of $30,000.

10.

During November, the company will declare and pay $100,000 in cash dividends.

11.

ABCD’s Cash balance at September 30 is $40,000.

12.

Has an agreement with a local bank that allows them to borrow in increments of $1,000 at the beginning of each month. The interest rate on the on loans is 1% per month and for simplicity we’ll assume the loan is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of each quarter to the extent it has available funds exceeded the $40,000 minimum balance amount.

Prepare the following Schedules for October, November and December.

a. EXPECTED CASH COLLECTIONS BUDGET

b. INVENTORY PURCHASES BUDGET

c. EXPENSE CASH DISBURSEMENT BUDGET (THIS BUDGET SHOULD INCLUDE TOTAL CASH DISBURSEMENTS FOR INVENTORY PURCHASES, SALARIES, ADVERTISING, SHIPPING AND MISCELLANEOUS EXPENSES)

Pitman Company is a small editorial services company owned and operated by Jan Pitman. On October 31, 2019, the end of the current year, Pitman Company's accounting clerk prepared the following unadjusted trial balance:

The data needed to determine year-end adjustments are as follows:

Required:

Unexpired insurance at October 31, $5,450.

Supplies on hand at October 31, $670.

Depreciation of building for the year, $3,610.

Depreciation of equipment for the year, $3,130.

Unearned rent at October 31, $2,020.

Accrued salaries and wages at October 31, $3,530.

Fees earned but unbilled on October 31, $20,730.

1. Journalize the adjusting entries using the following additional accounts: Salaries and Wages Payable; Rent Revenue; Insurance Expense; Depreciation Expense—Building; Depreciation Expense—Equipment; and Supplies Expense.

2. Determine the balances of the accounts affected by the adjusting entries, and prepare an adjusted trial balance. If an amount box does not require an entry, leave it blank.

Adjusting Entries and Adjusted Trial Balances

Pitman Company is a small editorial services company owned and operated by Jan Pitman. On October 31, 2019, the end of the current year, Pitman Company's accounting clerk prepared the following unadjusted trial balance:

The data needed to determine year-end adjustments are as follows:

Required:

Unexpired insurance at October 31, $3,930.

Supplies on hand at October 31, $480.

Depreciation of building for the year, $2,600.

Depreciation of equipment for the year, $2,250.

Unearned rent at October 31, $1,450.

Accrued salaries and wages at October 31, $2,540.

Fees earned but unbilled on October 31, $14,920.

1. Journalize the adjusting entries using the following additional accounts: Salaries and Wages Payable; Rent Revenue; Insurance Expense; Depreciation Expense—Building; Depreciation Expense—Equipment; and Supplies Expense.

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2. Determine the balances of the accounts affected by the adjusting entries, and prepare an adjusted trial balance. If an amount box does not require an entry, leave it blank.

Vino Veritas Company, a U.S.-based importer of wines and spirits, placed an order with a French supplier for 1,900 cases of wine at a price of 290 euros per case. The total purchase price is 551,000 euros. Relevant exchange rates for the euro are as follows:

Vino Veritas Company has an incremental borrowing rate of 12 percent (1 percent per month) and closes the books and prepares financial statements at September 30.

1. Assume that the wine arrived on September 15, and the company made payment on October 31. There was no attempt to hedge the exposure to foreign exchange risk. Prepare journal entries to account for this import purchase.

2. Assume that the wine arrived on September 15, and the company made payment on October 31. On September 15, Vino Veritas entered into a 45-day forward contract to purchase 551,000 euros. It properly designated the forward contract as a fair value hedge of a foreign currency payable. Prepare journal entries to account for the import purchase and foreign currency forward contract.

3. Vino Veritas ordered the wine on September 15. The wine arrived and the company paid for it on October 31. On September 15, Vino Veritas entered into a 45-day forward contract to purchase 551,000 euros. The company properly designated the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate. Prepare journal entries to account for the foreign currency forward contract, firm commitment, and import purchase.

4. The wine arrived on September 15, and the company made payment on October 31. On September 15, Vino Veritas purchased a 45-day call option for 551,000 euros. It properly designated the option as a cash flow hedge of a foreign currency payable. Prepare journal entries to account for the import purchase and foreign currency option.

5. The company ordered the wine on September 15. It arrived on October 31, and the company made payment on that date. On September 15, Vino Veritas purchased a 45-day call option for 551,000 euros. It properly designated the option as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the spot rate. Prepare journal entries to account for the foreign currency option, firm commitment, and import purchase.

On October 1, 20Y6, Jay Crowley established Affordable Realty, which completed the following transactions during the month:

1. Journalize entries for transactions Oct. 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 October 31, 20Y6.

Affordable Realty

UNADJUSTED TRIAL BALANCE

October 31, 20Y6

4. Determine the following:

5. Determine the increase or decrease in retained earnings for October.

Pitman Company is a small editorial services company owned and operated by Jan Pitman. On October 31, 2019, the end of the current year, Pitman Company's accounting clerk prepared the following unadjusted trial balance:

The data needed to determine year-end adjustments are as follows:

Required:

• Unexpired insurance at October 31, $4,560.
• Supplies on hand at October 31, $560.
• Depreciation of building for the year, $3,010.
• Depreciation of equipment for the year, $2,610.
• Unearned rent at October 31, $1,690.
• Accrued salaries and wages at October 31, $2,950.
• Fees earned but unbilled on October 31, $17,300.

1. Journalize the adjusting entries using the following additional accounts: Salaries and Wages Payable; Rent Revenue; Insurance Expense; Depreciation Expense—Building; Depreciation Expense—Equipment; and Supplies Expense.

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1. Before you begin, identify which adjusting entry goes with which additional account. As you go through each of these, consider the other sides of the adjusting entry transaction and identify related accounts. Keep in mind that you will be making an adjusting entry for each of these that affects at least one income statement account (revenues or expenses) and one balance sheet account (assets or liabilities). In the case of the insurance transaction, you will have to calculate the amount of insurance expired. In the case of supplies, you will need to calculate the amount of supplies used (expense). In the case of rent, you will need to calculate the amount of rent earned (revenue).

1. Journalize the adjusting entries using the following additional accounts, Salaries and Wages Payable, Rent Revenue, Insurance Expense, Depreciation Expense—Building, Depreciation Expense—Equipment, and Supplies Expense.

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