Question

Problem 7-4A Manufacturing: Preparation of a complete master budget LO P1, P2, P3 The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2017: ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2017 Assets $ 99,000 500,250 101,000 402,500 1,102,750 618,000 159,000 Cash Accounts receivable Raw materials inventory Finished goods inventory Total current assets Equipment, gross Accumulated depreciation Equipment, net 459,000 $1,561,750 Total assets Liabilities and Equity Accounts payable Short-term notes payable Total current liabilities $ 209,700 21,000 230,700 505,000 Long-term note payable Total liabilities 735,700 344,000 482,050 Common stock Retained earnings Total stockholders' equity 826,050 $1,561,750 Total liabilities and equity To prepare a master budget for April, May, and June of 2017, management gathers the following information: a. Sales for March total 23,000 units. Forecasted sales in units are as follows: April, 23,000; May, 19,000; June, 18,800; and July, 23,000. Sales of 249,000 units are forecasted for the entire year. The product's selling price is $29.00 per unit and its total product cost is $25.00 per unit. b. Company policy calls for a given month's ending raw materials inventory to equal 50% of the next month's materials requirements The March 31 raw materials inventory is 5,050 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,500 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials. c. Company policy calls for a given month's ending finished goods inventory to equal 70% of the next month's expected unit sales. The March 31 finished goods inventory is 16,100 units, which complies with the policy d. Each finished unit requires 0.50 hours of direct labor at a rate of $24 per hour e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.60 per direct labor hour Depreciation of $24,320 per month is treated as fixed factory overhead f. Sales representatives' commissions are 10% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,900 g. Monthly general and administrative expenses include $10,000 administrative salaries and 0.8% monthly interest on the long-term note payable h. The company expects 25% of sales to be for cash and the remaining 75% on credit. Receivables are collected in full in the month following the sale (none are collected in the month of the sale) i. All raw materials purchases are on credit, and no payables arise from any other transactions. One month's raw materials purchases are fully paid in the next month j. The minimum ending cash balance for all months is $110,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance k. Dividends of $19,000 are to be declared and paid in May ·No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 40% in the quarter and paid in the third calendar quarter m. Equipment purchases of $139,000 are budgeted for the last day of June Required Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the second calendar quarter, except as otherwise noted below. (Round calculations up to the nearest whole dollar, except for the amount of cash sales, which should be rounded down to the nearest whole dollar.) Required: Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the second calendar quarter, except as otherwise noted below. (Round calculations up to the nearest whole dollar, except for the amount of cash sales, which should be rounded down to the nearest whole dollar.) 1. Sales budget. 2. Production budget. 3. Raw materials budget. 4. Direct labor budget. S. Factory overhead budget. 6. Selling expense budget. 7. General and administrative expense budget. 8. Cash budget. 9. Budgeted income statement for the entire second quarter (not for each month separately) 10. Budgeted balance sheet. Complete this question by entering your answers in the tabs below Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Required 8 Required 9 Required 10 Cash budget. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign.) Calculation of Cash receipts from customers: May April June $ 667,000551,000$ 545,200 Total budgeted sales Cash sales 166,750 137,750 136,300 25% 75% $ 500,250 $ 413,250 $ 408,900 Sales on credit Total cash receipts from customers April May June $166,750 $137,750 136,300 Current month's cash sales Collections of receivables 500,250 500,250 413,250 $667,000 $ 638,000$549,550 Total cash receipts ZIGBY MANUFACTURING Cash Budget April, May, and June 2017 May June pril $ 99,000$ 171,690$ 262,082 Beginning cash balance Cash receipts from customers 66,000 638,000549,550 766,000 809,690 Total cash available 811,632 Cash payments for: 09,700 95,300203,000 242,400226,320260,880 36,36033,94839,132 055,100 54,520 903,900 ,00010,000 Raw materials Direct labor Variable overhead 66,700 Sales commissions Sales salaries 3,900 General & administrative salaries 19,000 Dividends 210 Loan interest 130 0404040 Long-term note interest 4,040 4,040 139,000 Purchases of equipment Taxes paid Total cash payments 547,608 573,310 714,602 97,030 Preliminary cash balance 192,690 262,082 (21,000) $ 171,690$ 262,082 S 110,030 Additional loan (loan repayment) 13,000 Ending cash balance Loan balance April May June $ 21,000$ Loan balance Beginning of month 13,000 Additional loan (loan repayment) (21,000) 0 $ 13,000 Loan balance End of month Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Req Budgeted income statement for the entire second quarter (not for each month separately). nearest whole dollar.) ZIGBY MANUFACTURING Budgeted Income Statement For Three Months Ended June 30, 2017 Operating expenses Total operating expenses 〈 Required 8 Required 10 Required 1 Required 2 Required 3 Required 4 Required 5 Required 6Require Budgeted balance sheet. (Round your final answers to the nearest whole dollar.) ZIGBY MANUFACTURING Budgeted Balance Sheet June 30, 2017 Assets Total current assets Equipment, net Total assets Liabilities and Equity Liabilities Total current liabilities Stockholders' Equity Total Stockholders' Equity Total Liabilities and Equity

Answer 1

1. Loan Interest in June should be 0 - (As we have paid all loans till May and on June loan, interest will not be charged in June itself as we will assume loan taken is at month end)

2. Taxes paid should be 0 for all periods.

3. So Preliminary Cash Balance will be 811,632 - 714,602 + 130 = 97,160

4. Additional Loan (loan repayment) will be 110,000- 97,160 = 12,840 - (As its not mentioned that loan is taken or repaid in multiples of 1,000's, I think it should be exact amount and not rounded off to 13,000)

Income Statement Reg 9 Sales -60,800 29 1,763,200 Cost of goods sold -60,800 25 1,520,000 Gross Profit 243,200 Operating expenses Sales Salaries 176,320 Sales Commissions 11,700 General Administrative Salaries 30,000 Interest on short term note payable 210 12,120 Interest on long term note payable Total Operating expenses 230,350 Income before taxes 12,850 5,140 -12,850*40% Income tax expense 7,710 Net Income Balance Sheet Reg 10 Assets Cash 110,000 Accounts Receivable 408,900 :545, 200*75% Raw Material Invento -4,500*20 90,000 -16,100 25 Finished goods Inventory 402,500 Total Current Assets 1,011,400 757,000 Equipment, gross -618,000+139,000 159000+24,320*3 Accumulated Depreciation 231,960 Equipment, net 525,040 Total Assets 1,536,440 Liabilities & Stockholders Equit Current Liabilties Accounts Payable 198,700 Income taxes Payable 5,140 From Income Statement Short term notes payable From cash budget 12,840 Total Current Liabilties 216,680 Long term notes payable 505,000 Total Liabilties 721,680 Stockholders Equity Common Stock 344,000 Retained Earnings 470,760 -482,050+7,710-19,000 Total Stockholders Equity 814,760 Total Liabilities & Stockholders Equity 1,536,440