Question

The Trolley Trolley Toy Company manufactures toy building block sets for children. Trolley Trolley is planning for 2019 2019 by developing a master budget by quarters. Trolley Trolley​'s balance sheet for December December 31 31​, 2018 2018​, ​follows:

Trolley Toy Company Balance Sheet December 31, 2018 Assets Current Assets: Cash 58,000 Accounts Receivable 22,000 Raw Materials Inventory 1,200 5,400 Finished Goods Inventory Total Current Assets 86,600 Property, Plant, and Equipment Equipment 142,000 (47,000) 95,000 Less: Accumulated Depreciation 181,600 Total Assets Liabilities Current Liabilities: 8,000 Accounts Payable Stockholders' Equity Common Stock, no par 120,000 53,600 Retained Earnings 173,600 Total Stockholders' Equity 181,600 Total Liabilities and Stockholders' Equity (Unless otherwise noted, assume all of the following events occurred during 2018 and that any balances given are stated as of December 31, 2018.) a. Budgeted sales are 1,400 sets for the first quarter and expected to increase by 150 sets per quarter. Cash sales are expected to be 30% of total sales, with the remaining 70% of sales on account. Sets are budgeted to sell for $90 per set. b. Finished Goods Inventory on December 31, 2018, consists of 200 sets at $27 each. Desired ending Finished Goods Inventory is 40% of the next quarter's sales, first quarter sales for 2020 are expected to be 2,000 sets. FIFO inventory costing method is used c. d. Raw Materials Inventory 3 pounds per set The cost is $2 per pound. Desired ending Raw Materials Inventory is 10% of the next quarter's direct materials needed for production; desired ending inventory for December 31, 2019, is 600 pounds, indirect materials are insignificant and not considered for budgeting purposes. December 31, 2018, consists of 600 pounds. Direct materials requirement is on e. $12 per hour f. Each set requires 0.30 hours of direct labor, direct labor costs aver g. Variable manufacturing overhead is $3.60 per set. h. Fixed manufacturing overhead includes $7,0000 per quarter in depreciation and $2,585 per quarter for other costs, such as utilities, insurance, and property taxes. i. Fixed selling and administrative expenses include $11,000 per quarter for salaries, $1,500 per quarter for rent, $1,350 per quarter for insurance; and $1,500 per quarter for depreciation. Variable selling and administrative expenses include supplies at 2% of sales j. k. Capital expenditures include $45,000 for new manufacturing equipment, to be purchased and paid for in the first quarter. Cash receipts for sales on account are 40% in the quarter of the sale and 60% in the quarter following the sale; Accounts Receivable balance on December 31, 2018, is expected to be received in the first quarter of 2019; uncollectible accounts are considered insignificant and not considered for budgeting purposes. m. Direct materials purchases are paid 90% in the quarter purchased and 10 % in the following quarter Accounts Payable balance on December 31, 2018, is expected to be paid in the first quarter of 2019. n. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred Income tax expense is projected at $3,500 per quarter and is paid in the quarter incurred. o. Trolley desires to maintain a minimum cash balance of $55,000 and borrows from the local bank as needed in increments of $1,000 at the beginning of the quarter, principal repayments are made at the beqinning of the quarter when excess funds are available and in increments of $1,000; interest is 10% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter p. Trolley Toy Company Sales Budget For the Year Ended December 31, 2019 First Second Third Fourth Quarter Quarter Quarter Quarter Total Budgeted sets to be sold 1,400 1,550 1,700 1,850 6,500 90 S 90 $ 90 $ 90 $ 90 Sales price per unit 126,000 $ 153,000 $ 166,500 S 139,500 S 585,000 Total sales Quarter Total Quarter Quarter Quarter 126000 139500 153000 166500 585000 Total sales First Second Third Fourth Quarter Quarter Quarter Quarter Total Cash Receipts from Customers: Accounts Receivable balance, December 31, 2018 1st Qtr.-Cash sales 1st Qtr.-Credit sales, collection of Qtr. 1 sales in Qtr. 1 1st Qtr.-Credit sales, collection of Qtr. 1 sales in Qtr. 2 2nd Qtr.-Cash sales 2nd Qtr.-Credit sales, collection of Qtr. 2 sales in Qtr. 2 2nd Qtr.-Credit sales, collection of Qtr. 2 sales in Qtr. 3 3rd Qtr.-Cash sales 3rd Qtr.-Credit sales, collection of Qtr. 3 sales in Qtr. 3 3rd Qtr.-Credit sales, collection of Qtr. 3 sales in Qtr. 4 4th Qtr-Cash sales 4th Qtr-Credit sales, collection of Qtr. 4 sales in Qtr. 4 Total cash receipts from customers Accounts Receivable balance, December 31, 2019: 4th Qtr.-Credit sales, collection of Qtr. 4 sales in Qtr. 1 of 2020

Answer 1

Cash Receipts from customers schedule is as prepared below:

	Qtr 1	Qtr 2	Qtr 3	Qyr 4	Total
Total sales	126,000	139,500	153,000	166,500	585,000
Cash receipts from customers:
Account Receivable balance, December 31, 2018	22,000				22,000
1st Qtr Cash sales	37800				37,800
1st Qtr Credit Sales, Collection of Qtr 1 sales in Qtr 1	35280				35,280
1st Qtr Credit Sales, Collection of Qtr 1 sales in Qtr 2		52920			52,920
2nd Qtr Cash sales		41850			41,850
2nd Qtr Credit Sales, Collection of Qtr 2 sales in Qtr 2		39060			39,060
2nd Qtr Credit Sales, Collection of Qtr 2 sales in Qtr 3			58590		58,590
3rd Qtr Cash sales			45900		45,900
3rd Qtr Credit Sales, Collection of Qtr 3 sales in Qtr 3			42840		42,840
3rd Qtr Credit Sales, Collection of Qtr 3 sales in Qtr 4				64260	64,260
4th Qtr Cash sales				49950	49,950
4th Qtr Credit Sales, Collection of Qtr 4 sales in Qtr 4				46620	46,620
Total cash receipts from customers	95,080	133,830	147,330	160,830	537,070
Account Receivable balance, December 31, 2019
4th Qtr Credit Sales, Collection of Qtr 4 sales in Qtr 1 of 2020				69930	69,930