Question :
146. Sound Off Audio Systems sells and installs car stereo systems. : 1208260
146. Sound Off Audio Systems sells and installs car stereo systems. Managers need to prepare an inventory purchases budget for the first quarter of 2012. The company’s sales budget for the first quarter is provided below:
Based on past experience the company expects the cost of goods sold to equal 80% of sales. Furthermore, the ending inventory balance each month should be $4,000 plus 20% of the current period’s cost of goods sold. The inventory balance on December 31, 2012 was $17,000. The company makes all purchases on account and pays 60% of accounts payable in the month of purchase and the remaining 40% in the next month. Accounts payable stood at $18,000 at December 31, 2012.
Required:
1) Prepare an inventory purchases budget for January, February, and March of 2012.
2) Determine the amount of ending inventory and the accounts payable balance that will appear on the March 31, 2012 pro forma balance sheet.
3) Prepare a schedule of cash payments for inventory for January, February, and March, 2012.
147. Nancy Beebe is opening Beebe Realty on January 2. For several weeks she has been busy putting together an operating budget for the first quarter of operation for her new business. Nancy has estimated her selling and administrative (S&A) costs as follows:
All selling and administrative costs are paid when incurred except utilities, marketing expenses, and sales commissions. These items are paid in the month following the month incurred.
Required:
1) Prepare a schedule of cash payments for selling and administrative expenses for January through March.
2) What liabilities, in what amounts, would be reported on the pro forma balance sheet as of March 31?
148. Groveland Company’s balance sheet as of December 31, 2012 is provided below:
In anticipation of preparing the operating budget for the upcoming period, the firm’s accountant has gathered the following information:
(a) Sales are budgeted at $160,000 for January 2010. Of these sales, half will be cash sales and half will be credit sales. Eighty percent of the credit sales are collected in the month of sale and the remainder is collected in the next month. Therefore, all of the December 31 receivables will be collected in January.
(b) Inventory purchases are expected to total $100,000 during January, all on account. Sixty percent of all purchases are paid for in the month of purchase and the remainder is paid in the following month. Therefore, all of the December 31 accounts payable will be paid during January. The inventory account is expected to have a $20,000 balance at January 31, 2010.
(c) Selling and administrative expenses for January are budgeted at $50,000 (exclusive of depreciation). S&A expenses are paid in cash. Depreciation is budgeted at $1,500 for the month.
(d) The notes payable will be paid in April. There is no cash outflow related to the note in January.
The sales manager wishes to purchase a new display case for the showroom during January if sufficient funds are available. The equipment has a cost of $4,500.
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