Master Budget [LO 2] Techlabs operates a computer training center. The following
ID: 2355773 • Letter: M
Question
Master Budget [LO 2]Techlabs operates a computer training center. The following data relate to the preparation of a master budget for January 2012.
1.
At the end of 2011, the company’s general ledger indicated the following balances:
Debits Credits
Cash $55,000 Accounts Payable $32,000
Accounts receivable 41,500 Note payable 57,000
Equipment (net) 114,000 Common stock 33,000
Retained earnings
88,500
Total
$210,500
$210,500
2. Tuition revenue in December 2011 was $83,000, and tuition revenue budgeted for January 2012 is $92,000.
3. 50 percent of tuition revenue is collected in the month earned, and 50 percent is collected in the subsequent month. The receivable balance at the end of 2012 reflects tuition earned in December 2012.
4. Monthly expenses (excluding interest expense) are budgeted as follows: salaries, $45,000; rent, $6,000; depreciation on equipment, $8,000; utilities, $600; other, $1,800.
5. Expenses are paid in the month incurred. Purchases of equipment are paid in the month after purchase. The $32,000 payable at the end of 2011 represents money owed for the purchase of computer equipment in December 2011.
6. The company intends to purchase $20,000 of computer equipment in January 2012. The anticipated $8,000 per month of depreciation (see number 4) reflects the addition of $1,000 of monthly depreciation related to this purchase.
7. The note is at 10 percent per annum and requires monthly interest payments of $475. The payments are made on the 20th of each month.The principal must be paid in February of 2013.
8. The tax rate is 35 percent.
Complete the following budget: (Round answers to 0 decimal places, e.g. 5,250. Enter all amounts as positive amounts and subtract where necessary.)
Budgeted Cash Receipts and Disbursements
For January 2012
Cash Receipts
Collection of December 2011 tuition $
Collection of January 2012 tuition
Total cash receipts
Cash Disbursements
Payment of salaries
Payment of rent
Payment of utilities
Payment of other expenses
Payment for purchases of computer equipment
Payment of interest on note
Payment of taxes
Total cash disbursements
Plus beginning cash balance
Ending cash balance $
Complete the following budget: (Round answers to 0 decimal places, e.g. 5,250. Enter all amounts as positive amounts and subtract where necessary.)
Budgeted Income Statement
For January 2012
Tuition revenue $
Less:
Salaries $
Rent
Utilities
Other expenses
Depreciation
Interest expense
Total expense
Income before taxes
Taxes on income
Net income
$
Complete the following budget: (Round answers to 0 decimal places, e.g. 5,250.)
Budgeted Balance Sheet
As of January 2012
Assets
Cash $
Accounts receivable
Equipment (net)
Total assets
$
Liabilities
Accounts payable $
Note payable
Total liabilities
Stockholders’ equity
Common stock
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity $
Explanation / Answer
Budgeted Cash Receipts and Disbursements for January 2012
Cash Receipts
Collection of December 2011 Tuition
41,500
Collection of January 2012 Tuition
46,000
Total Cash Receipts
87,500
Cash Disbursements
Payment of Salaries
45,000
Payment of Rent
6,000
Payment of Utilities
600
Payment of other Expenses
1,800
Payment for Purchases of computer equipment
32,000
Payment of interest on note
475
Payment of taxes
10,544
Total Cash Disbursements
96,419
Plus beginning cash balance
55,000
Ending Cash Balance
46,081
Budgeted Income Statement for January 2012
Tuition Revenue
92,000
Less
salaries
45,000
rent
6,000
Utilitiess
600
other expenses
1,800
Depreciation
8000
Interest expense
475
Total expense
61,875
Income before taxes
30,125
Taxes on income
10,544
Net income
19,581
Complete the following budget: (Round answers to 0 decimal places, e.g. 5,250.)
Budgeted Balance Sheet
As of January 2012
Assets
Cash $
46,081
Accounts receivable
46,000
Equipment (net)
126,000
(114,000+20,000-8,000)
Total assets
218,081
Liabilities
Accounts payable $
20,000
Note payable
57,000
Total liabilities
77,000
Stockholders’ equity
Common stock
33,000
Retained earnings
108,081
(88,500 previous RE +19,581 NI)
Total stockholders’ equity
141,081
Total liabilities and stockholders’ equity $
218,081
Budgeted Cash Receipts and Disbursements for January 2012
Cash Receipts
Collection of December 2011 Tuition
41,500
Collection of January 2012 Tuition
46,000
Total Cash Receipts
87,500