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    Cash budget/Income Statement/Balance Sheet

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    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