Question

INSTRUCTIONS:

Based on the information available below, complete the Cash Budget, Income Statement, and Budgeted Balance Sheet worksheet

4 A relatively new company, Get Laughy Taffy, Inc., has determined they need to engage in a budgeting 5 process as part of their new strategic plan. The Company has asked you to provide the following items 6 for the months of January, February, and March of 2020: A) a Purchases Budget; B) a Cash Budget; C) a 7 Budgeted Income Statement; and D) a Budgeted Balance Sheet. They have provided you with the B planning document below and also, with their December 31, 2019 Balance Sheet. Please complete the 9 four budget documents requested on Worksheet Tabs A, B, C, and D of this Workbook. Check Figures 0 are provided for you on each Worksheet. Get Laughy Taffy, Inc. PLANNING DATA FOR 2020 $245,000 $ 266,000 7 Actual November 2019 Sales 8 Actual December 2019 Sales 9 Expected 2020 Monthly Sales January February March :3 April !1 $ 179,000 $ 184,000 $ 163,000 $176,000 2 5 All Sales are on Credit !6 Collections of Accounts Receivable: 17 Month of Service 8 Month following Service 41.00% 59.00% 10 Cost of Goods Sold as a percentage of selling price. 65.00% 12 Planned ending inventory as a percentage of next month's required inventory. 62.00% 14 Purchases are are all on credit. 15 Actual Purchases made in December 2019 $137,839

Answer 1

Cash Budget
	Jan	Feb	Mar
Opening balance of Cash	$303,200	$343,581	$348,009
Receipts
Collection from Customers	$230,330	$181,050	$175,390
Total Cash Available	$533,530	$524,631	$523,399
Payment
Purchase payment	$131,997	$116,197	$111,153
Marketing Expenses Fixed	$3,540	$3,540	$3,540
Marketing Expenses Variable	$3,675	$3,990	$2,685
Sales Commission(2.5% on Sale) paid	$6,650	$4,475	$4,600
Selling and Administrative Exp Fixed	$19,800	$19,800	$19,800
Selling and Administrative Exp Variable	$5,320	$3,580	$3,680
Interest Expenses Paid on Feb			$1,350
Insurance Expenses		$14,031
Income Tax Expenses	$14,977
Dividend Paid		$15,000
Total Payment	$185,959	$181,918	$146,808
Ending cash balance	$347,571	$346,704	$375,286

Budgeted Income Statement for Jan ,Feb and Mar
	Jan	Feb	Mar
Sales	$179,000	$184,000	$163,000
Less : Cost Sale (65% of Sales)	$116,350	$119,600	$105,950
Gross Margin	$62,650	$64,400	$57,050
Operating Expenses
Marketing Expenses	$6,225	$6,300	$5,985
Sales Commission(2.5% on Sale)	$4,475	$4,600	$4,075
Insurance Expenses ($15,660 x1/12)	$1,278	$1,278	$1,278
Selling and Administrative Exp	$23,380	$23,480	$23,060
Depreciation	$5,300	$5,300	$5,300
Total Operating Expenses	$40,658	$40,958	$39,698
Operating Income	$21,992	$23,442	$17,352
Interest Expenses	$450	$450	$450
Income before income tax	$21,542	$22,992	$16,902
Income tax Expenses	$4,524	$4,828	$3,549
Net Income	$17,018	$18,164	$13,353

Working note:

Collection from customer :-

Payment terms 41% in same month and 59% in following months

Month	Calculation	Collection amount
Dec	$245,000x59%+$266,000X41%	$253,610
Jan	$266,000x59%+$179,000X41%	$230,330
Feb	$179,000x59%+$184,000X41%	$181,050
Mar	$184,000x59%+$163,000X41%	$175,390

Payment of Purchase :-

Month	Calculation	Purchase payment
Jan	$137,839x70%+$118,365 x30%	$131,997
Feb	$118,365 x70%+$111,137x30%	$116,197
Mar	$111,137x70% + $111,189x30%	$111,153

Other Expense :-

	Fixed	Variable	Total
Marketing Expenses
Jan	$3,540	$2,685	$6,225
Feb	$3,540	$2,760	$6,300
Mar	$3,540	$2,445	$5,985
Sales Commission(2.5% on Sale)			Mar
Jan	$4,475
Feb	$4,600
Mar	$4,075
	Fixed	Variable	Total
Selling and Administrative Exp		2% on Sale
Jan	$19,800	$3,580	$23,380
Feb	$19,800	$3,680	$23,480
Mar	$19,800	$3,260	$23,060
Interest Expenses (4% on long term debt)
Dec	$450
Jan	$450
Feb	$450
Mar	$450
Interest Expenses Paid on Feb	$1,350
( Interest paid from Dec to Feb on Feb)
Variable Marketing Expenses paid	Month
Jan (1.5% on sale)	Nov	$3,675
Feb (1.5% on sale)	Dec	$3,990
Mar (1.5% on sale)	Jan	$2,685
Sales Commission(2.5% on Sale) paid
Jan	Dec	$6,650
Feb	Jan	$4,475
Mar	Feb	$4,600
Selling and Administrative Exp variable paid	Month
Jan (2% on sale)	Dec	$5,320
Feb (2% on sale)	Jan	$3,580
Mar (2% on sale)	Feb	$3,680