Question

Part 1

Preparing a Budgeted Income Statement

Oliver Company provided the following information for the coming year:

Units produced and sold	160,000
Cost of goods sold per unit	$6.30
Selling price	$13
Variable selling and administrative expenses per unit	$1.10
Fixed selling and administrative expenses	$423,000
Tax rate	18 %

Required:

Prepare a budgeted income statement for Oliver Company for the coming year. Round all income statement amounts to the nearest dollar.

Oliver Company
Budgeted Income Statement
For the Coming Year
	$
	$
	$
	$

Part 2

Preparing a Schedule of Cash Collections on Accounts Receivable

Kailua and Company is a legal services firm. All sales of legal services are billed to the client (there are no cash sales). Kailua expects that, on average, 20% will be paid in the month of billing, 50% will be paid in the month following billing, and 25% will be paid in the second month following billing. For the next 5 months, the following sales billings are expected:

May	$84,000
June	100,800
July	77,000
August	87,000
September	89,000

Required:

Prepare a schedule showing the cash expected in payments on accounts receivable in August and in September. If an amount box does not require an entry, leave it blank or enter "0". Be sure to enter percentages as whole numbers.

Kailua and Company Schedule
				August		September
June:
$ ×  %				$		$
July:
$ ×  %
$ ×  %
August:
$ ×  %
$ ×  %
September:
$ ×  %
Total cash receipts				$		$

Answer 1

14 15 16 17 18 19 Oliver Company Budgeted Income Statement For the Coming Year Sales (160000 *13) Cost of goods sold (160000*6.30) Gross margin Less: Variable selling and administrative expenses Less: Fixed selling and administrative expenses Operating income Less: Income taxes Net income 20 2,080,000 1,008,000 1,072,000 176,000 423,000 473,000 85,140 387,860 21 22 23 24 25 Part 2

39 Kailua and Company Schedule August September 40 41 42 25200 43 44 38500 45 19250 46 June: 100800 * *25% July 77000 * 50% 77000 *25% August: 87000 * 20% 87000 * 50% September: 89000 *20% Total cash receipts 47 17400 48 43500 49 17800 50 51 81100 80550 52 53