accounting-Aragon and Associates has found from past experience that 25%

QUESTION

1. Cash Budget
Aragon and Associates has found from past experience that 25% of
its services are for cash. The remaining 75% are on credit. An aging schedule
for accounts receivable reveals the following pattern:
a.
Ten percent of fees on credit are paid in the month that service
is rendered.
b.
Sixty percent of fees on credit are paid in the month following
service.
c.
Twenty-six percent of fees on credit are paid in the second
month following service.
d.
Four percent of fees on credit are never collected.
Fees (on credit) that have not been paid until the second month
following performance of the legal service are considered overdue and are
subject to a 3% late charge.
Aragon has developed the following forecast of fees:

May

$180,000

June

200,000

July

190,000

August

194,000

September

240,000

Required:
Prepare a schedule
of cash receipts for August and September. If an amount box does not require an
entry, leave it blank or enter “0”. Round answers to the nearest
dollar.

Aragon and Associates

Schedule of Cash
Receipts

For August and
September

August

September

Cash fees

$

$

Received from sales in:

June

July

August

September

Total

$

$

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Preparing a Production Budget
Patrick Inc. makes industrial solvents. In the
first four months of the coming year, Patrick expects the following unit sales:

January

41,000

February

38,000

March

50,000

April

51,000

Patrick’s policy is to have 20% of next
month’s sales in ending inventory. On January 1, it is expected that there will
be 4,400 drums of solvent on hand.
Required: Prepare
a production budget for the first quarter of the year. Show the number of drums
that should be produced each month as well as for the quarter in total. If
required, round your answers to the nearest whole unit.

Patrick Inc.

Production Budget

For the Coming Quarter

January

February

March

1st Quarter Total

Sales

Desired ending inventory

Total needs

Less: Beginning inventory

Units to be produced

Preparing a Budgeted Income Statement
Oliver Company provided the following
information for the coming year:

Units produced and sold

160,000

Cost of goods sold per unit

$6.30

Selling price

$14

Variable selling and administrative expenses per unit

$1.10

Fixed selling and administrative expenses

$423,000

Tax rate

23 %

Required:
Prepare a budgeted income statement for Oliver Company for the
coming year. Round all income statement amounts to the nearest dollar.

Oliver Company

Budgeted Income
Statement

For the Coming Year

Sales

$

Cost of goods sold

Gross margin

$

Less: Variable selling and administrative expenses

Less: Fixed selling and administrative expenses

Operating income

$

Less: Income taxes

Net income

$

ANSWER:

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