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Cash budget/Income Statement/Balance Sheet

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 $ 50,000 Accounts Payable $ 40,000
Accounts receivable 40,000 Note payable 60,000
Equipment (net) 120,000 Common stock 30,000
Retained earnings 80,000
Total $210,000 $210,000

2. Tuition revenue in December 2011 was $80,000, and tuition revenue budgeted for January 2012 is $90,000.

3. Fifty 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, $40,000; rent, $5,000; depreciation on equipment, $7,000; utilities, $800; other, $2,000.

5. Expenses are paid in the month incurred. Purchases of equipment are paid in the month after purchase.The $40,000 payable at the end of 2011 represents money owed for the purchase of computer equipment in December 2011.

6. The company intends to purchase $30,000 of computer equipment in January 2012.The anticipated $7,000 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 $500. 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 budgets:

a. Cash Budget
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 disbursements
Plus beginning cash balance
Ending cash balance $
Copyright © 2010 John Wiley & Sons

b. Budget Income Statement
For January 2012
Tuition revenue $
Interest expense
Total expense
Income before taxes
Taxes on income
Net income $

c. Budgeted Balance Sheet
As of January 30, 2012
Cash $
Accounts receivable
Equipment (net)
Total assets $
Accounts payable $
Note payable
Total liabilities $
Stockholders' equity
Common stock
Retained earnings
Total stockholders' equity
Total liabilities and stockholders' equity $

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Solution Summary

The solution explains how to complete the cash budget, prepare income statement and balance sheet