Ruberstein, Inc. was founded on April 1 and entered into thefollowing transactions: Apr 1: Issued common stock to shareholdersin exchange for cash, $20,000 Apr 1: Purchased a delivery van(equipment), $13,000 Apr 1: Purchased a one-year insurance policyto be consumed evenly over the next 12 months, $4800 Apr 1: Tookout a loan from First Bank, $20,000 Apr 6: Hired two new monthlyemployees on salary of $1000/month each. Apr 7: Purchased officesupplies on credit, $1200 Apr 8: Billed customers for servicesprovided, $7500 Apr 12: Paid to have an ad placed on a billboardduring April, $1300 Apr 18: Billed customers for services provided,$8600 Apr 24: Paid dividends to stockholders, $1000 Apr 30:Received utility bills for the month of April to be paid nextmonth, $740 Apr 30: Prepaid the next six months of rent startingwith May, $3600 April depreciation for the delivery van is $217.Interest on the loan from the bank is paid annually at a rate of 6%An inventory count of office supplies at April 30 showed $500 ofsupplies on hand. Prepaid insurance has expired Employees' salariesearned during April but to be paid in May, $2000. Post Journalentries to general ledger using T accounts.
Ruberstein, Inc. was founded on April 1 and entered into thefollowing transactions: Apr 1: Issued common stock to shareholdersin exchange for cash, $20,000 Apr 1: Purchased a delivery van(equipment), $13,000 Apr 1: Purchased a one-year insurance policyto be consumed evenly over the next 12 months, $4800 Apr 1: Tookout a loan from First Bank, $20,000 Apr 6: Hired two new monthlyemployees on salary of $1000/month each. Apr 7: Purchased officesupplies on credit, $1200 Apr 8: Billed customers for servicesprovided, $7500 Apr 12: Paid to have an ad placed on a billboardduring April, $1300 Apr 18: Billed customers for services provided,$8600 Apr 24: Paid dividends to stockholders, $1000 Apr 30:Received utility bills for the month of April to be paid nextmonth, $740 Apr 30: Prepaid the next six months of rent startingwith May, $3600 April depreciation for the delivery van is $217.Interest on the loan from the bank is paid annually at a rate of 6%An inventory count of office supplies at April 30 showed $500 ofsupplies on hand. Prepaid insurance has expired Employees' salariesearned during April but to be paid in May, $2000. Post Journalentries to general ledger using T accounts.
Related questions
Kegglerâs Supply is a merchandiser of three different products. The companyâs February 28 inventories are footwear, 18,500 units; sports equipment, 79,500 units; and apparel, 49,500 units. Management believes each of these inventories is too high. As a result, a new policy dictates that ending inventory in any month should equal 31% of the expected unit sales for the following month. Expected sales in units for March, April, May, and June follow.
| Budgeted Sales in Units | ||||
| March | April | May | June | |
| Footwear | 14,500 | 23,500 | 33,500 | 33,500 |
| Sports equipment | 71,000 | 91,500 | 95,000 | 91,000 |
| Apparel | 41,000 | 37,500 | 33,500 | 23,000 |
Required:
1. Prepare a merchandise purchases budget (in units) for each product for each of the months of March, April, and May.
During the last week of August, Oneida Companyâs owner approaches the bank for a $106,500 loan to be made on September 2 and repaid on November 30 with annual interest of 16%, for an interest cost of $4,260. The owner plans to increase the storeâs inventory by $60,000 during September and needs the loan to pay for inventory acquisitions. The bankâs loan officer needs more information about Oneidaâs ability to repay the loan and asks the owner to forecast the storeâs November 30 cash position. On September 1, Oneida is expected to have a $4,000 cash balance, $138,600 of net accounts receivable, and $100,000 of accounts payable. Its budgeted sales, merchandise purchases, and various cash disbursements for the next three months follow.
| Budgeted Figures* | September | October | November | |||
| Sales | $ | 220,000 | $ | 405,000 | $ | 490,000 |
| Merchandise purchases | 235,000 | 210,000 | 193,000 | |||
| Cash payments | ||||||
| Payroll | 19,700 | 21,850 | 24,800 | |||
| Rent | 12,000 | 12,000 | 12,000 | |||
| Other cash expenses | 34,500 | 31,600 | 21,000 | |||
| Repayment of bank loan | 106,500 | |||||
| Interest on the bank loan | 4,260 | |||||
*Operations began in August; August sales were $180,000 and purchases were $100,000.
The budgeted September merchandise purchases include the inventory increase. All sales are on account. The company predicts that 23% of credit sales is collected in the month of the sale, 47% in the month following the sale, 19% in the second month, 7% in the third, and the remainder is uncollectible. Applying these percents to the August credit sales, for example, shows that $84,600 of the $180,000 will be collected in September, $34,200 in October, and $12,600 in November. All merchandise is purchased on credit; 80% of the balance is paid in the month following a purchase, and the remaining 20% is paid in the second month. For example, of the $100,000 August purchases, $80,000 will be paid in September and $20,000 in October.
Required:
Prepare a cash budget for September, October, and November. (Round your final answers to the nearest whole dollar.)
Aztec Company sells its product for $170 per unit. Its actual and budgeted sales follow.
| Units | Dollars | ||
| April (actual) | 4,500 | $ | 765,000 |
| May (actual) | 2,200 | 374,000 | |
| June (budgeted) | 5,000 | 850,000 | |
| July (budgeted) | 4,000 | 849,000 | |
| August (budgeted) | 3,800 | 646,000 | |
All sales are on credit. Recent experience shows that 22% of credit sales is collected in the month of the sale, 48% in the month after the sale, 26% in the second month after the sale, and 4% proves to be uncollectible. The productâs purchase price is $110 per unit. 60% of purchases made in a month is paid in that month and the other 40% is paid in the next month. The company has a policy to maintain an ending monthly inventory of 24% of the next monthâs unit sales plus a safety stock of 160 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,896,000 and are paid evenly throughout the year in cash. The companyâs minimum cash balance at month-end is $100,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $100,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 12% interest rate. On May 31, the loan balance is $49,500, and the companyâs cash balance is $100,000.
Required:
1. Prepare a schedule that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July.
2. Prepare a schedule that shows the computation of budgeted ending inventories (in units) for April, May, June, and July.
3. Prepare the merchandise purchases budget for May, June, and July. Report calculations in units and then show the dollar amount of purchases for each month.
4. Prepare a schedule showing the computation of cash payments for product purchases for June and July.
5. Prepare a cash budget for June and July, including any loan activity and interest expense. Compute the loan balance at the end of each month.
Near the end of 2017, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2017.
| DIMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2017 | ||||||
| Assets | ||||||
| Cash | $ | 35,500 | ||||
| Accounts receivable | 520,000 | |||||
| Inventory | 100,000 | |||||
| Total current assets | $ | 655,500 | ||||
| Equipment | 588,000 | |||||
| Less: accumulated depreciation | 73,500 | |||||
| Equipment, net | 514,500 | |||||
| Total assets | $ | 1,170,000 | ||||
| Liabilities and Equity | ||||||
| Accounts payable | $ | 370,000 | ||||
| Bank loan payable | 14,000 | |||||
| Taxes payable (due 3/15/2018) | 92,000 | |||||
| Total liabilities | $ | 476,000 | ||||
| Common stock | 473,000 | |||||
| Retained earnings | 221,000 | |||||
| Total stockholdersâ equity | 694,000 | |||||
| Total liabilities and equity | $ | 1,170,000 | ||||
To prepare a master budget for January, February, and March of 2018, management gathers the following information.
The companyâs single product is purchased for $20 per unit and resold for $56 per unit. The expected inventory level of 5,000 units on December 31, 2017, is more than managementâs desired level, which is 20% of the next monthâs expected sales (in units). Expected sales are: January, 7,000 units; February, 9,000 units; March, 11,000 units; and April, 10,500 units.
Cash sales and credit sales represent 20% and 80%, respectively, of total sales. Of the credit sales, 57% is collected in the first month after the month of sale and 43% in the second month after the month of sale. For the December 31, 2017, accounts receivable balance, $130,000 is collected in January and the remaining $390,000 is collected in February.
Merchandise purchases are paid for as follows: 20% in the first month after the month of purchase and 80% in the second month after the month of purchase. For the December 31, 2017, accounts payable balance, $70,000 is paid in January and the remaining $300,000 is paid in February.
Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $72,000 per year.
General and administrative salaries are $132,000 per year. Maintenance expense equals $2,200 per month and is paid in cash.
Equipment reported in the December 31, 2017, balance sheet was purchased in January 2017. It is being depreciated over eight years under the straight-line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter: January, $38,400; February, $96,000; and March, $21,600. This equipment will be depreciated under the straight-line method over eight years with no salvage value. A full monthâs depreciation is taken for the month in which equipment is purchased.
The company plans to buy land at the end of March at a cost of $175,000, which will be paid with cash on the last day of the month.
The company has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and interest is paid at each month-end based on the beginning balance. Partial or full payments on these loans can be made on the last day of the month. The company has agreed to maintain a minimum ending cash balance of $19,000 at the end of each month.
The income tax rate for the company is 43%. Income taxes on the first quarterâs income will not be paid until April 15.
Required:
Prepare a master budget for each of the first three months of 2018; include the following component budgets:
1. Monthly sales budgets.
2. Monthly merchandise purchases budgets.
3. Monthly selling expense budgets.
4. Monthly general and administrative expense budgets.
5. Monthly capital expenditures budgets.
6. Monthly cash budgets.
7. Budgeted income statement for the entire first quarter (not for each month).
8. Budgeted balance sheet as of March 31, 2018.
PREPARE THE JOURNAL ENRTRIES FOR THE FOLLOWING (0NLY FROM TRANSACTON 28 TO 45
| During July 2017, the following transactions, prepared by Maddie's Cleaning Service, were completed: | ||
| Transaction | Date | Description |
| 1 | July 1 | Began her business by contributing a computer valued at $500 and rug cleaner at $6,200 and depositing $2X,XXX (XXXX- represents the last 4 digits of your Bronc's identification number) in a checking account in the name of the corporation in exchange for 6,000 shares, $1 par value shares of capital stock. |
| 2 | 1 | Received $10,000 proceeds from an unsecured, 11%, 5 year, interest only bank loan, due July 1, 2017. The proceeds will be used to pay daily operations of the company. Interest will be paid monthly on the fifth of each month; next payment day is June 5th August 5. |
| 1 | Purchased 30 shares of Facebook stock for market rate as of July 1, 2017. MCS paid $12.00 brokerage fee. Use the Short-term Investment (Available For Sale) account. | |
| 3 | 2 | Paid $1,500 for 3 floor waxer/buffer machines. |
| 4 | 2 | Purchased a used truck for $18,000 in exchange for a 3 year zero-interest bearing $25,000 note to Jim's Auto Sales. |
| 5 | 3 | Purchased cleaning supplies for $6,500. These supplies will not be resoldâuse the Cleaning Supplies Inventory account, 2%/15, net 30. The company uses the period inventory method. |
| 6 | 3 | Paid cash for an exclusive 3 yr right to sell cleaning products from Brite Nâ Clean Supply company, $8,900. |
| 7 | 3 | Purchased 350 cans of cleaning product, XB4, on account, for resale purposes only, from Brite Nâ Clean. Each can costs $8.00. Total shipping costs were $15.00, also included in the amount owedâuse the Merchandise Inventory Account. |
| 8 | 4 | Signed a two year lease agreement for storge and office location. Paid 3 months of rent in advance, $3,000, plus security deposit of $1,000, total $4,000 |
| 9 | 5 | Paid $4,800 on a one-year insurance policy, effective July 1. |
| 10 | 7 | Hired 5 workers at $15.50 per hour. |
| 11 | 8 | Jim Bob Grocery Store paid Maddie's $5,900 in advance for cleaning services to be performed monthly. |
| 12 | 12 | Billed customers $22,300 for cleaning services. |
| 13 | 15 | Paid gas and oil for the month on the truck, $600. |
| 14 | 18 | Paid amount owed on cleaning supplies purchased on July 3rd. |
| 15 | 18 | Billed customers $16,500 for cleaning services. |
| 16 | 18 | Purchased 40 cans of cleaning product, XB4, $400, for resale purposes only on account. The costs include total shipping costs of $30.00. |
| 17 | 18 | Paid $5,000 to employees, with withholding of $960 for federal income taxes, $150 for state income taxes, $310 for social security, $725 for Medicare tax, and $100 for city income tax. Use Employee Tax Withheld account for all withholding. |
| 18 | 18 | Accrue employer tax (related to July 18th payroll) of $1,352. These taxes include employer portion of FICA and Medicare tax and state and federal unemployment tax. Use Employer Tax Payable account. |
| 19 | 21 | Collected $25,400 from customers billed on July 12. |
| 20 | 22 | Sold 200 cans of cleaning product, XB4, to T. Jones Cleaning on account for $30.00 each. Maddie'sâs Cleaning Services, Inc. uses a perpetual inventory method for its merchandise inventory sales and determines costs using LIFO in-first out (LIFO) costing method. Shipping costs were 5%. Costs were charged to T. Jones Cleaning. |
| 21 | 24 | Using Ms. Colbertâs credit card, purchased a used cleaning cart used to carry cleaning supplies to each office, $400. |
| 22 | 25 | Purchased a computer to support office activities, $2,000. |
| 23 | 30 | Bank returned a check for $125 from Tang Juice Company for services paid on July 21st. The bank charges Maddie'sâs Cleaning Services $5.00 service fee for the NSF check. |
| 24 | 30 | Paid withholding tax for July 18th payroll, including employer tax. |
| 25 | 30 | Sold one of the floor polisher purchased on July 1 for $850. Record all depreciation related to equipment. |
| 26 | 31 | Declared and paid a $.25 per share cash dividend. |
| After talking with the client, Ms. Ratcher prepared the following information related to July transactions (use July 31 for the date of transactions): | ||
| 28 | 1 | Earned but unbilled fees at July 31 were $4,245. |
| 29 | 2 | All equipment is depreciated over 5 years, using the straight line method. Depreciate all equipment as if purchased on July 1. |
| 30 | 3 | An inventory count shows $1,700 of cleaning supplies (not for resale) on hand at July 31. |
| 31 | 4 | Record the amortization of the franchise. |
| 32 | 5 | Accrued but unpaid employee salaries were $5,000 with withholding of $880 for federal income taxes. Calculate the payroll using 6.2% FICA tax, 3% for state income taxes, 1.45% Medicare tax, and 2% for city income tax. Record the payroll, using Employee Tax Withheld account for all withholding taxes. |
| 33 | 6 | Accrued employer payroll tax of $800.00 |
| 34 | 7 | Record the rent expiration for the month. |
| 35 | 8 | Record the interest incurred on the note for the month. |
| 36 | 9 | Record amortization of the zero-interest bearing note. |
| 37 | 10 | MCS charged Jim Bob's Grocery $2,800 for services rendered during the month. (See earlier transaction). |
| 39 | 11 | Calculate the change in value of Facebook stock based on market prices as of July 31, 2017. |
| 40 | 12 | One-twelfth of the insurance expired. |
| 41 | 13 | Accrue income taxes for the period. The company expects to pay income taxes at a 18% rate. Note: you must calculate income before you can determine the amount for this adjusting entry. |
| 42 | 14 | Based on an aging of the accounts receivables, Ms. Colbert estimates that 5.5% of outstanding accounts receivables will be uncollectible. |
| 43 | Based on the bank reconciliation performed by John, the other new staff member at Daniel and Jacob, LLC, the following adjusting entries should be made: | |
| 44 | --- A check from Elton Inc. was returned for non sufficient funds (NSF) for $1,000. The check was included in the deposit made on July 21st . | |
| 45 | --- The deposit made on July 21st for cash receipts was recorded $24,400, but bank correctly counted the deposit to be $25,400. | |
