Foundations of Accounting Assignment
Once you have completed the assignment below, you must submit your answers using the answer sheet provided in Canvas (in the Assignments area); not all answers will be turned in. Once submitted, your answers cannot be changed. Where appropriate, partial credit will be given. The teaching assistants and I can help you on Part A of the assignment, but not on Part B. Unlike a quiz, you may work with other classmates if you wish, but you must submit your own work.
Part A
Cover-UP! Incorporated buys mobile phone cases and then resells them through the company's website; each unit is purchased for $18 and then sold for $30.
The company had the following sales data available in units: July 6,000 (actual), August 6,000 (budget), September 9,000 (budget), October 4,000 (budget) and November 5,000 (budget). All sales are made on account and experience shows that 40% of sales are collected in the month of the sale and 60% in the month after the sale.
All product purchases made by the company are paid in full in the month of purchase. The company maintains ending inventory equal to 25% of the next month's unit sales and the company had 1,200 units in inventory on August 1st.
The company's advertising is considered a variable cost and is budgeted at $2 per unit based on the current month's sales. Administrative costs include rent for office space of $5,000 per month and salaries totaling $8,000 per month. The company plans on giving its employees a pay raise in September, which would increase salaries by $1,000 per month. All selling and administrative costs are paid in full each month.
The company's cash balance on August 1stis $40,000.
Required:
Given the information above, prepare a sales budget, purchases budget, cash budget, budgeted income statement and a budgeted balance sheet (cash, accounts receivable and inventory sections only) for August and September.
Part B
The Earth Springs Corporation buys water reclamation and filtration systems then resells them for $1,000 per unit and plans to raise that price by $100 in May. The company had the following sales data available in units: February 1,100 (actual), March 1,000 (budget), April 1,300 (budget), May 1,400 (budget) and June 1,600 (budget). All sales are made on account and recent experience shows that 20% of sales are collected in the month of the sale and 80% in the month after the sale.
The company purchases its product for $800 per unit and all purchases are paid in full in the month the purchase is made. The company maintains ending inventory equal to 25% of the next month's unit sales and had 260 units in inventory on March 1st.
The company's advertising is fixed at $3,500 per month, has other administrative costs of $33,000 per month and salaries of $40,000 per month; all selling and administrative expenses are paid in full each month. The company plans to give its salaried employees a one-time bonus of $4,000 in April.
The company plans to purchase $150,000 of equipment in May and plans to take out a $100,000 loan in April to help fund the purchase.
The company's cash balance on February 28this $35,000.
Required:
Given the information above, prepare a sales budget, purchases budget, cash budget, budgeted income statement, cash budget and a budgeted balance sheet (for cash, accounts receivable, inventory and liabilities) for March, April and May.
Question 1
For Cover-UP!, what is the company's total dollar amount for budgeted sales for August?
Question 2
For Cover-UP!, what is the company's total dollar amount for budgeted purchases for August?
Question 3
For Cover-UP!, what is the company's budgeted ending cash for August?
Question 4
For Cover-UP!, what is the company's budgeted net income for September?
Question 5
For Cover-UP!, what is the company's total dollar amount for budgeted inventory for September?
Question 6
For Earth Springs, what is the company's total dollar amount for budgeted sales for May?
Question 7
For Earth Springs, what is the company's total dollar amount for budgeted purchases for April?
Question 8
For Earth Springs, what is the company's budgeted ending cash for May?
Question 9
For Earth Springs, what is the company's budgeted net income for April?
Question 10
For Earth Springs, what is the company's amount for budgeted accounts receivable for May?
Question 11
For Earth Springs, what is the company's amount for budgeted liabilities for May?