e following projected information for the first six months e

e following projected information for the first six months ending December 31, 2018. a. On July 1, 2018 B. Jensen deposited $50,000 in the business bank account as Capital contribution. Sales are $25 per unit. The projected unit s July Aug Sept Oct Nov Dec b. ales are as follows 500 520 550 580 600 650 Sales are 50% collected in the month of sale and 50% in the month following sale. These later customer are to pay their accounts in the second month following sale c. Interest earned on the checking account each month is $100 in July-September and $150 October- December. Production in units July Aug Sept Oct Nov Dec d. 510 500 570 600 620 660 e. Raw Materials used in production cost S5 per unit. Of this 80% is paid in the month of production and 20% is paid in the month following production. f. Direct Labor costs of $10 per unit are payable in the month of production. g. Variable expenses are $3 per unit, payable one-half in the month as production and one-half in the month following production h. Fixed expenses are $500 per month payable in the same month of production. i. Owner draws are $1,000 per month. j. On July 1, B. Jensen will purchase computers costing $10,000 on account. Half will be paid in March and second half will be paid in June. The computers are to be depreciated at 20% per annum. Required: (please shoe your workings) a. Prepare a projected cash budget for B. Jensen for the six months ending December 31, 2018. b. Prepare a projected income statement and balance sheet as of the same date.

Solution

Cash Budget for six months ending december 31 2018 Capital Contribution 50000 Add: Sales collection 76875 Add: Interest earned 750 Less: Direct Material costs -16640 Less: Labor costs -34600 Less: Variable expenses -9390 Less: Fixed expenses -3000 Less: Withdrawal by onwer 1000*6 -6000 Bank and cash balance 57995 Income Statement for six months ending december 31 2018 Sales 85000 Closing stock 1184 Interest Income 750 Less: Direct material costs -17300 Labour costs -34600 Variable costs -10380 Fixed expenses -3000 Depreciation -2000 Net Profit 19654 Balance sheet as on december 31 2018 Capital Contribution 50000 Fixed assets Less Depreciation Less: Withdrawals 6000 (20000-(20%*20000)/2) 18000 44000 Net profit 19654 63654 Account Payable Raw Materials 660 Bank Account 57995 Variable expense 990 Accounts receivable 8125 Purchase of machinery 20000 Closing stock 1184 85304 85304 Sales Working July Aug Sept Oct Nov Dec Units 500 520 550 580 600 650 Unit Price 25 25 25 25 25 25 Total Sales 12500 13000 13750 14500 15000 16250 85000 Collection 6250 12750 13375 14125 14750 15625 76875 Accounts receivable 16250*50% 8125 Interest Working July- Sept 100*3 300 Oct- Dec 150*3 450 750 Purchase cost of raw materials July Aug Sept Oct Nov Dec Production 510 500 570 600 620 660 Unit Price 5 5 5 5 5 5 Total Raw material costs 2550 2500 2850 3000 3100 3300 17300 Paid 2040 2510 2780 2970 3080 3260 16640 Direct Labor costs July Aug Sept Oct Nov Dec Production 510 500 570 600 620 660 Unit Price 10 10 10 10 10 10 Total Labor costs 5100 5000 5700 6000 6200 6600 34600 Variable expenses July Aug Sept Oct Nov Dec Production 510 500 570 600 620 660 Unit Price 3 3 3 3 3 3 Total Variable costs 1530 1500 1710 1800 1860 1980 10380 Paid 765 1515 1605 1755 1830 1920 9390 990 Fixed Expenses July Aug Sept Oct Nov Dec 500 500 500 500 500 500 3000 Calculation of closing stock July Aug Sept Oct Nov Dec Production 510 500 570 600 620 660 3460 Less: Sales 500 520 550 580 600 650 3400 Closing Units 60 Raw Material 300 Labour cost 600 Variable cost 180 Overhead expenses 104 1184