Prepare summary journal entries to record the following
transactions for a company in its first month of
operations.
A. Raw materials purchased on account, $100,000.
B. Direct materials used in production, $42,000. Indirect materials used in production, $15,000.
C. Paid cash for factory payroll, $50,000. Of this total, $36,000 is for direct labor and $14,000 is for indirect labor.
D. Paid cash for other actual overhead costs, $8,250.
E. Applied overhead at the rate of 120% of direct labor cost.
F. Transferred cost of jobs completed to finished goods, $68,175.
G. Sold jobs on account for $97,000. The jobs had a cost of $68,175.
In: Accounting
Prepare summary journal entries to record the following
transactions for a company in its first month of
operations.
In: Accounting
During the first week of lockdown, you decided not to spend more than $30 on your food. You ate only hotdog with burger bread, and that also in a 1:1 combination, and nothing else. The prices of both these goods were $1 per unit. Find out the optimum amount of hotdog and burger bread you consumed that week. In the second week, due to lack of supply the price of hotdog increased to $2 while the price of burger bread did not change. How many hotdogs and burgers bread did you consume in the second week? Explain the income and substitution effects of this price change using a diagram
In: Economics
Inflation Issues
In: Economics
our accounts receivable clerk, Mitra Adams, to whom you pay a
salary of $2,715 per month, has just purchased a new Acura. You
decide to test the accuracy of the accounts receivable balance of
$148,420 as shown in the ledger.
The following information is available for your first year
in business.
| (1) | Collections from customers | $358,380 | ||
| (2) | Merchandise purchased | 579,200 | ||
| (3) | Ending merchandise inventory | 162,900 | ||
| (4) | Goods are marked to sell at 40% above cost |
Compute an estimate of the ending balance of accounts receivable
from customers that should appear in the ledger and any apparent
shortages. Assume that all sales are made on account.
In: Accounting
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below.
The company sells many styles of earrings, but all are sold for the same price—$16 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):
| January (actual) | 22,000 | June (budget) | 52,000 |
| February (actual) | 28,000 | July (budget) | 32,000 |
| March (actual) | 42,000 | August (budget) | 30,000 |
| April (budget) | 67,000 | September (budget) | 27,000 |
| May (budget) | 102,000 | ||
The concentration of sales before and during May is due to Mother’s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.
Suppliers are paid $5.00 for a pair of earrings. One-half of a month’s purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit. Only 20% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.
Monthly operating expenses for the company are given below:
| Variable: | |||
| Sales commissions | 4 | % of sales | |
| Fixed: | |||
| Advertising | $ | 300,000 | |
| Rent | $ | 28,000 | |
| Salaries | $ | 126,000 | |
| Utilities | $ | 12,000 | |
| Insurance | $ | 4,000 | |
| Depreciation | $ | 24,000 | |
Insurance is paid on an annual basis, in November of each year.
The company plans to purchase $21,000 in new equipment during May and $50,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $22,500 each quarter, payable in the first month of the following quarter.
The company’s balance sheet as of March 31 is given below:
| Assets | ||
| Cash | $ | 84,000 |
| Accounts receivable ($44,800 February sales; $537,600 March sales) | 582,400 | |
| Inventory | 134,000 | |
| Prepaid insurance | 26,000 | |
| Property and equipment (net) | 1,050,000 | |
| Total assets | $ | 1,876,400 |
| Liabilities and Stockholders’ Equity | ||
| Accounts payable | $ | 110,000 |
| Dividends payable | 22,500 | |
| Common stock | 1,000,000 | |
| Retained earnings | 743,900 | |
| Total liabilities and stockholders’ equity | $ | 1,876,400 |
The company maintains a minimum cash balance of $60,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.
The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $60,000 in cash.
Required:
Prepare a master budget for the three-month period ending June 30. Include the following detailed schedules:
1. a. A sales budget, by month and in total.
b. A schedule of expected cash collections, by month and in total.
c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total.
d. A schedule of expected cash disbursements for merchandise purchases, by month and in total.
In: Accounting
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below.
The company sells many styles of earrings, but all are sold for the same price—$16 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):
| January (actual) | 22,000 | June (budget) | 52,000 |
| February (actual) | 28,000 | July (budget) | 32,000 |
| March (actual) | 42,000 | August (budget) | 30,000 |
| April (budget) | 67,000 | September (budget) | 27,000 |
| May (budget) | 102,000 | ||
The concentration of sales before and during May is due to Mother’s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.
Suppliers are paid $5.00 for a pair of earrings. One-half of a month’s purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit. Only 20% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.
Monthly operating expenses for the company are given below:
| Variable: | |||
| Sales commissions | 4 | % of sales | |
| Fixed: | |||
| Advertising | $ | 300,000 | |
| Rent | $ | 28,000 | |
| Salaries | $ | 126,000 | |
| Utilities | $ | 12,000 | |
| Insurance | $ | 4,000 | |
| Depreciation | $ | 24,000 | |
Insurance is paid on an annual basis, in November of each year.
The company plans to purchase $21,000 in new equipment during May and $50,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $22,500 each quarter, payable in the first month of the following quarter.
The company’s balance sheet as of March 31 is given below:
| Assets | ||
| Cash | $ | 84,000 |
| Accounts receivable ($44,800 February sales; $537,600 March sales) | 582,400 | |
| Inventory | 134,000 | |
| Prepaid insurance | 26,000 | |
| Property and equipment (net) | 1,050,000 | |
| Total assets | $ | 1,876,400 |
| Liabilities and Stockholders’ Equity | ||
| Accounts payable | $ | 110,000 |
| Dividends payable | 22,500 | |
| Common stock | 1,000,000 | |
| Retained earnings | 743,900 | |
| Total liabilities and stockholders’ equity | $ | 1,876,400 |
The company maintains a minimum cash balance of $60,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.
The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $60,000 in cash.
3. A budgeted income statement for the three-month period ending June 30. Use the contribution approach.
Prepare a master budget for the three-month period ending June 30 that includes a budgeted income statement for the three-month period ending June 30. Use the contribution approach.
In: Accounting
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below.
The company sells many styles of earrings, but all are sold for the same price—$16 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):
| January (actual) | 22,000 | June (budget) | 52,000 |
| February (actual) | 28,000 | July (budget) | 32,000 |
| March (actual) | 42,000 | August (budget) | 30,000 |
| April (budget) | 67,000 | September (budget) | 27,000 |
| May (budget) | 102,000 | ||
The concentration of sales before and during May is due to Mother’s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.
Suppliers are paid $5.00 for a pair of earrings. One-half of a month’s purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit. Only 20% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.
Monthly operating expenses for the company are given below:
| Variable: | |||
| Sales commissions | 4 | % of sales | |
| Fixed: | |||
| Advertising | $ | 300,000 | |
| Rent | $ | 28,000 | |
| Salaries | $ | 126,000 | |
| Utilities | $ | 12,000 | |
| Insurance | $ | 4,000 | |
| Depreciation | $ | 24,000 | |
Insurance is paid on an annual basis, in November of each year.
The company plans to purchase $21,000 in new equipment during May and $50,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $22,500 each quarter, payable in the first month of the following quarter.
The company’s balance sheet as of March 31 is given below:
| Assets | ||
| Cash | $ | 84,000 |
| Accounts receivable ($44,800 February sales; $537,600 March sales) | 582,400 | |
| Inventory | 134,000 | |
| Prepaid insurance | 26,000 | |
| Property and equipment (net) | 1,050,000 | |
| Total assets | $ | 1,876,400 |
| Liabilities and Stockholders’ Equity | ||
| Accounts payable | $ | 110,000 |
| Dividends payable | 22,500 | |
| Common stock | 1,000,000 | |
| Retained earnings | 743,900 | |
| Total liabilities and stockholders’ equity | $ | 1,876,400 |
The company maintains a minimum cash balance of $60,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.
The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $60,000 in cash.
Prepare a master budget for the three-month period ending June 30 that includes a budgeted balance sheet as of June 30.
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In: Accounting
Case 8-33 Master Budget with Supporting Schedules [LO8-2, LO8-4, LO8-8, LO8-9, LO8-10]
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below.
The company sells many styles of earrings, but all are sold for the same price—$18 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):
| January (actual) | 22,800 | June (budget) | 52,800 |
| February (actual) | 28,800 | July (budget) | 32,800 |
| March (actual) | 42,800 | August (budget) | 30,800 |
| April (budget) | 67,800 | September (budget) | 27,800 |
| May (budget) | 102,800 | ||
The concentration of sales before and during May is due to Mother’s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.
Suppliers are paid $5.40 for a pair of earrings. One-half of a month’s purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit. Only 20% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.
Monthly operating expenses for the company are given below:
| Variable: | |||
| Sales commissions | 4 | % of sales | |
| Fixed: | |||
| Advertising | $ | 340,000 | |
| Rent | $ | 32,000 | |
| Salaries | $ | 134,000 | |
| Utilities | $ | 14,000 | |
| Insurance | $ | 4,400 | |
| Depreciation | $ | 28,000 | |
Insurance is paid on an annual basis, in November of each year.
The company plans to purchase $23,000 in new equipment during May and $54,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $25,500 each quarter, payable in the first month of the following quarter.
The company’s balance sheet as of March 31 is given below:
| Assets | ||
| Cash | $ | 88,000 |
| Accounts receivable ($51,840 February sales; $616,320 March sales) | 668,160 | |
| Inventory | 146,448 | |
| Prepaid insurance | 28,000 | |
| Property and equipment (net) | 1,090,000 | |
| Total assets | $ | 2,020,608 |
| Liabilities and Stockholders’ Equity | ||
| Accounts payable | $ | 114,000 |
| Dividends payable | 25,500 | |
| Common stock | 1,080,000 | |
| Retained earnings | 801,108 | |
| Total liabilities and stockholders’ equity | $ | 2,020,608 |
The company maintains a minimum cash balance of $64,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.
The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $64,000 in cash.
Required:
Prepare a master budget for the three-month period ending June 30. Include the following detailed schedules:
3. A budgeted income statement for the three-month period ending June 30. Use the contribution approach.
4. A budgeted balance sheet as of June 30.
In: Accounting
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash.
Since you are well trained in budgeting, you have decided to prepare comprehensive budgets for the upcoming second quarter in order to show management the benefits that can be gained from an integrated budgeting program. To this end, you have worked with accounting and other areas to gather the information assembled below.
The company sells many styles of earrings, but all are sold for the same price—$16 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):
| January (actual) | 21,200 | June (budget) | 51,200 |
| February (actual) | 27,200 | July (budget) | 31,200 |
| March (actual) | 41,200 | August (budget) | 29,200 |
| April (budget) | 66,200 | September (budget) | 26,200 |
| May (budget) | 101,200 | ||
The concentration of sales before and during May is due to Mother’s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.
Suppliers are paid $4.6 for a pair of earrings. One-half of a month’s purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however, that only 20% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.
Monthly operating expenses for the company are given below:
| Variable: | |||
| Sales commissions | 4% | of sales | |
| Fixed: | |||
| Advertising | $ | 260,000 | |
| Rent | $ | 24,000 | |
| Salaries | $ | 118,000 | |
| Utilities | $ | 10,000 | |
| Insurance | $ | 3,600 | |
| Depreciation | $ | 20,000 | |
Insurance is paid on an annual basis, in November of each year.
The company plans to purchase $19,000 in new equipment during May and $46,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $19,500 each quarter, payable in the first month of the following quarter.
A listing of the company’s ledger accounts as of March 31 is given below:
| Assets | ||
| Cash | $ | 80,000 |
| Accounts receivable ($43,520 February sales;$527,360 March sales) | 570,880 | |
| Inventory | 121,808 | |
| Prepaid insurance | 24,000 | |
| Property and equipment (net) | 1,010,000 | |
| Total assets | $ | 1,806,688 |
| Liabilities and Stockholders’ Equity | ||
| Accounts payable | $ | 106,000 |
| Dividends payable | 19,500 | |
| Common stock | 920,000 | |
| Retained earnings | 761,188 | |
| Total liabilities and stockholders’ equity | $ | 1,806,688 |
The company maintains a minimum cash balance of $56,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.
The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $56,000 in cash.
2. A cash budget. Show the budget by month and in total. (Cash deficiency, repayments and interest should be indicated by a minus sign.)
3. A budgeted income statement for the three-month period ending June 30. Use the contribution approach.
4. A budgeted balance sheet as of June 30.
In: Accounting