4 5 6 7 8 9 10 11 12 13 14 T8 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 The Gessing Tire Company manufactures racing tires for bicycles. Gessing sells tires for $85 each. Gessing is planning for the next year by developing a master budget by quarters. Gessing's balance sheet for December 31, 2018, follows: Gessing Tire Company Balance sheet December 31, 2018 S Current Assets: Cash Accounts Receivable Raw Materials Inventory Finished Goods Inventory 52,000 35,000 1,900 2,400 S 91,300 Total Current Assets Property, Plant, and Equipment: Equipment Less: Accumulated Depreciation 142.000 (50,000) 92,000 1 183.300 Total Assets $ I Liabilities Current Liabilities: Accounts Payable $10,000 Stockholder's Equity Common Stock, no par 110,000 Retained Earnings 63,300 ve A.XX Aaby AA EEE Normal 2 3 4 5 6 7 9 10 11 12 13 14 15 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Stockholder's Equity Common Stock, no par $ 110,000 Retained Earnings 63,300 Total Stockholders' Equity 173,300 Total Liabilities and Stockholder's Equity $ 183,300 Other data for Gessing Tire Company: A. Budgeted sales are 1,000 tires for the first quarter and expected to increase by 100 tires per quarter. Cash sales are expected to be 20% of total sales, with the remaining 80% of sales on account. B. Finished Goods Inventory on December 31, 2018 consists of 100 tires at $24 each. C. Desired ending Finished Goods Inventory is 50% of the next quarter's sales; first quarter sales for 2020 are expected be 1,400 tires. FIFO inventory costing method is used. D. Raw Materials Inventory on December 31, 2018, consists of 200 pounds of rubber compound used to manufacture the tires. E. Direct materials requirements are 2 pounds of a rubber compound per tire. The cost of the compound is $9.50 per pound. F. Desired ending Raw Materials Inventory is 10% of the next quarter's direct materials needed for production, desired ending inventory for December 31, 2019 is 200 pounds; indirect materials are insignificant and not considered for budgeting purposes G. Each tire requires 0.60 hours of direct labor; direct labor costs average S16 per hour, dl 3 2 1 1 2 3 4 5 6 7 8 9 10 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 LU. H. Variable manufacturing overhead is $2 per tire. 1. Fixed manufacturing overhead includes $3,500 per quarter in depreciation and $28,220 per quarter for other costs, such as utilities, insurance, and property taxes. J. Fixed selling and administrative expenses include $8,000 per quarter for salaries; $5,700 per quarter for rent; $1,650 per quarter for insurance; and $1,000 per quarter for depreciation. K. Variable selling and administrative expenses include supplies at 1% of sales. L. Capital expenditures include $35,000 for new manufacturing equipment, to be purchased and paid in the first quarter. M. Cash receipts for sales on account are 80% in the quarter of sale and 20% in the quarter following the sale; December 31, 2018, Accounts receivable is received in the first quarter of 2019, uncollectible accounts are considered insignificant not considered for budgeting purposes. N. Direct materials purchases are paid 80% in the quarter of the sale and 20% in the following quarter, December 31, 2018, Accounts payable is paid in the first quarter of 2019. O. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred. P. Income tax expense is projected at $3,000 per quarter and is paid in the quarter Q. Gessing desires to maintain a minimum cash balance of $50,000 and borrows from the local bank as needed in increments of S1,000 at the beginning of the quarter: principal repayments are made at the beginning of the quarter when excess funds are available and in increments of $1,000; interest is 6% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter. Read the requirments incurred B/O Home Insert Page Layout References Review View Section Tools w Roman noe - AA T.EE A A A-41 AaBbccd AaB Aal U. A. X X. Aaly A - AREE D.O. - 12 Normal Heading 1 Head 1 2 3 4 5 6 7 8 9 10 11 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 Kead the requirments: 1. Prepare Gessing's operating budget and cash budget for 2019 by quarter. Required schedules and budgets include: sales budget, production budget, direct materials budget, direct labor budget, manufacturing overhead budget, cost of goods sold budget, selling and administrative expense budget, schedule of cash receipts, schedule of cash payments, and cash budget. Manufacturing overhead costs are allocated based on direct labor hours. Round all calculations to the nearest dollar. 2. Prepare Gessing's annual financial budget for 2019, including budgeted income statement and budgeted balance sheet. Before preparing the cost of goods sold budget, calculate the projected manufacturing cost per tire for 2019. Round all amounts to the nearest cent. Direct materials cost per tire $ Direct labor cost per tire Manufacturing overhead cost per tire Total projected manufacturing cost per tire for 2019 Cost of goods sold budget For the year ended december 31, 2019 1" quarter 2nd quarter 3rd quarter 4th quarter total Beginning inventory Tires produced and sold in 2019 Total budgeted cost of goods sold V 1 1 2 3 4 5 6 7 8 9 10 5 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 Prepare the selling and administrative expense budget: Selling and administrative budget For the year ended december 31, 2019 1* quarter | 2nd quarter | 3rd quarter | 4th quarter | Total Salaries expense Rent expense Insurance expense Depreciation expense Supplies expense Total budgeted selling and administrative expense Prepare cash receipts budget: 1" quarter 2nd quarter 3rd quarter 4th quarter total Total sales 1" quarter 2nd quarter | 3rd quarter | 4th quarter total Cash receipts from customers Accounts receivable balance, December 31, 2018 1" qtr.- cash sales 1" qtr.- credit sales, collection Of qtr. 1 sales in qtr. 1 2nd qtr.- cash sales 2nd qtr.- credit sales, collection fasteslerin at V 1st quarter 2nd quarter 3rd quarter | 4th quarter total Cash receipts from customers Accounts receivable balance, December 31,2018 1* qtr.- cash sales 1st qtr.- credit sales, collection Of qtr. 1 sales in qtr. 1 2nd qtr.- cash sales 2nd qtr.- credit sales, collection Of qtr. 2 sales in qtr. 2 2nd qtr.- credit sales, collection of qtr. 2 sales in qtr. 3 3rd qtr.- cash sales 3rd qtr.-credit sales, collection of qtr. 3 sales in qtr. 3 3rd qtr.- credit sales, collection Of qtr. 3 sales in qtr. 4 4th qtr.-cash sales 4th qtr.- credit sales collection Of qtr. 4 sales in qtr. 4 Total cash receipts from customers Accounts Receivable balance, December 31, 2019: 4th qtr.- Credit sales, collection of Qtr. 4 sales In qtr. 1 of 2020 New Roman 12 AA I U-A- XX, A - ab A A = = A. AaBbccd AaBb Heading 1 Normal 1 2 3 4 5 6 7 8 9 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 Prepare the cash payments budget: Round to the nearest dollar: 1st quarter | 2nd quarter 3rd quarter | 4th quarter total Total direct materials purchases 1st quarter 2nd quarter 3rd quarter 4th quarter total Cash payments Direct materials: Accounts payable balance, December 31, 2018 1"qtr.-qtr. 1 direct material purchases paid in qtr. 1 1" qtr.-qtr. 1 direct material purchases paid in qtr. 2 2nd qtr.- qtr. 2 direct material purchases paid in qtr. 2 2nd qtr.- qtr. 2 direct material purchases paid in qtr. 3 3rd qtr. - qtr. 3 direct material purchases paid in qtr. 3 3rd qtr. - qtr. 3 direct material purchases paid in qtr. 4 4th qtr. - qtr. 4 direct material purchases paid in qtr. 4 Total payments for direct materials Direct labor: Total payments for direct labor Manufacturing overhead: Variable manufacturing overhead Utilities, insurance, property taxes Total payments for manufacturing overhead Selling and Administrative expense: Salaries expense Rent expense Insurance expense Total payments for selling and admin. Expenses Income taxes: Total payments for income taxes Capital expenditures: Total payments for capital expenditures Total cash payments (before interest) Accounts payable balance, December 31, 2019 4th qtr.- qtr. 4 direct materials purchases Paid in qtr 1 of 2020 Prepare the cash budget: Prepare the cash budget: Tire company Cash budget For the year ended December 31, 2019 1st quarter 2nd quarter | 3rd quarter | 4th quarter total Beginning cash balance Cash receipts Cash available Cash payments: Capital expenditures Purchases of direct materials Direct labor Manufacturing overhead Selling and administrative expenses Income taxes Interest expense Total cash payments Ending cash balance before financing Minimum cash balance desired Projected cash excess (deciency) Financing: Borrowing Principal repayments Total effects of financing Ending cash balance . counting chegg.docx W Document1 + PR. Home Insert Page Layout References Review View Section Tools Calibri (Body - 12 A A O IEEEA21%AaBbccd AaBb AaBbcA= BIU. A XXAAA Normal Heading 1 Heading 2 4 3 2 1 7 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 1 2 3 4 5 6 7 9 10 11 12 Minimum cash balance desired Projected cash excess (deciency) Financing: Borrowing Principal repayments Total effects of financing Ending cash balance Tire Company Budgeted income statement For the year ended december 31, 2019 Sales revenue Cost of goods sold Gross profit Selling and administrative expenses Operating income Interest expense Income before income taxes Income tax expense Net income 4 5 6 7 8 9 10 11 12 13 14 T8 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 The Gessing Tire Company manufactures racing tires for bicycles. Gessing sells tires for $85 each. Gessing is planning for the next year by developing a master budget by quarters. Gessing's balance sheet for December 31, 2018, follows: Gessing Tire Company Balance sheet December 31, 2018 S Current Assets: Cash Accounts Receivable Raw Materials Inventory Finished Goods Inventory 52,000 35,000 1,900 2,400 S 91,300 Total Current Assets Property, Plant, and Equipment: Equipment Less: Accumulated Depreciation 142.000 (50,000) 92,000 1 183.300 Total Assets $ I Liabilities Current Liabilities: Accounts Payable $10,000 Stockholder's Equity Common Stock, no par 110,000 Retained Earnings 63,300 ve A.XX Aaby AA EEE Normal 2 3 4 5 6 7 9 10 11 12 13 14 15 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Stockholder's Equity Common Stock, no par $ 110,000 Retained Earnings 63,300 Total Stockholders' Equity 173,300 Total Liabilities and Stockholder's Equity $ 183,300 Other data for Gessing Tire Company: A. Budgeted sales are 1,000 tires for the first quarter and expected to increase by 100 tires per quarter. Cash sales are expected to be 20% of total sales, with the remaining 80% of sales on account. B. Finished Goods Inventory on December 31, 2018 consists of 100 tires at $24 each. C. Desired ending Finished Goods Inventory is 50% of the next quarter's sales; first quarter sales for 2020 are expected be 1,400 tires. FIFO inventory costing method is used. D. Raw Materials Inventory on December 31, 2018, consists of 200 pounds of rubber compound used to manufacture the tires. E. Direct materials requirements are 2 pounds of a rubber compound per tire. The cost of the compound is $9.50 per pound. F. Desired ending Raw Materials Inventory is 10% of the next quarter's direct materials needed for production, desired ending inventory for December 31, 2019 is 200 pounds; indirect materials are insignificant and not considered for budgeting purposes G. Each tire requires 0.60 hours of direct labor; direct labor costs average S16 per hour, dl 3 2 1 1 2 3 4 5 6 7 8 9 10 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 LU. H. Variable manufacturing overhead is $2 per tire. 1. Fixed manufacturing overhead includes $3,500 per quarter in depreciation and $28,220 per quarter for other costs, such as utilities, insurance, and property taxes. J. Fixed selling and administrative expenses include $8,000 per quarter for salaries; $5,700 per quarter for rent; $1,650 per quarter for insurance; and $1,000 per quarter for depreciation. K. Variable selling and administrative expenses include supplies at 1% of sales. L. Capital expenditures include $35,000 for new manufacturing equipment, to be purchased and paid in the first quarter. M. Cash receipts for sales on account are 80% in the quarter of sale and 20% in the quarter following the sale; December 31, 2018, Accounts receivable is received in the first quarter of 2019, uncollectible accounts are considered insignificant not considered for budgeting purposes. N. Direct materials purchases are paid 80% in the quarter of the sale and 20% in the following quarter, December 31, 2018, Accounts payable is paid in the first quarter of 2019. O. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred. P. Income tax expense is projected at $3,000 per quarter and is paid in the quarter Q. Gessing desires to maintain a minimum cash balance of $50,000 and borrows from the local bank as needed in increments of S1,000 at the beginning of the quarter: principal repayments are made at the beginning of the quarter when excess funds are available and in increments of $1,000; interest is 6% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter. Read the requirments incurred B/O Home Insert Page Layout References Review View Section Tools w Roman noe - AA T.EE A A A-41 AaBbccd AaB Aal U. A. X X. Aaly A - AREE D.O. - 12 Normal Heading 1 Head 1 2 3 4 5 6 7 8 9 10 11 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 Kead the requirments: 1. Prepare Gessing's operating budget and cash budget for 2019 by quarter. Required schedules and budgets include: sales budget, production budget, direct materials budget, direct labor budget, manufacturing overhead budget, cost of goods sold budget, selling and administrative expense budget, schedule of cash receipts, schedule of cash payments, and cash budget. Manufacturing overhead costs are allocated based on direct labor hours. Round all calculations to the nearest dollar. 2. Prepare Gessing's annual financial budget for 2019, including budgeted income statement and budgeted balance sheet. Before preparing the cost of goods sold budget, calculate the projected manufacturing cost per tire for 2019. Round all amounts to the nearest cent. Direct materials cost per tire $ Direct labor cost per tire Manufacturing overhead cost per tire Total projected manufacturing cost per tire for 2019 Cost of goods sold budget For the year ended december 31, 2019 1" quarter 2nd quarter 3rd quarter 4th quarter total Beginning inventory Tires produced and sold in 2019 Total budgeted cost of goods sold V 1 1 2 3 4 5 6 7 8 9 10 5 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 Prepare the selling and administrative expense budget: Selling and administrative budget For the year ended december 31, 2019 1* quarter | 2nd quarter | 3rd quarter | 4th quarter | Total Salaries expense Rent expense Insurance expense Depreciation expense Supplies expense Total budgeted selling and administrative expense Prepare cash receipts budget: 1" quarter 2nd quarter 3rd quarter 4th quarter total Total sales 1" quarter 2nd quarter | 3rd quarter | 4th quarter total Cash receipts from customers Accounts receivable balance, December 31, 2018 1" qtr.- cash sales 1" qtr.- credit sales, collection Of qtr. 1 sales in qtr. 1 2nd qtr.- cash sales 2nd qtr.- credit sales, collection fasteslerin at V 1st quarter 2nd quarter 3rd quarter | 4th quarter total Cash receipts from customers Accounts receivable balance, December 31,2018 1* qtr.- cash sales 1st qtr.- credit sales, collection Of qtr. 1 sales in qtr. 1 2nd qtr.- cash sales 2nd qtr.- credit sales, collection Of qtr. 2 sales in qtr. 2 2nd qtr.- credit sales, collection of qtr. 2 sales in qtr. 3 3rd qtr.- cash sales 3rd qtr.-credit sales, collection of qtr. 3 sales in qtr. 3 3rd qtr.- credit sales, collection Of qtr. 3 sales in qtr. 4 4th qtr.-cash sales 4th qtr.- credit sales collection Of qtr. 4 sales in qtr. 4 Total cash receipts from customers Accounts Receivable balance, December 31, 2019: 4th qtr.- Credit sales, collection of Qtr. 4 sales In qtr. 1 of 2020 New Roman 12 AA I U-A- XX, A - ab A A = = A. AaBbccd AaBb Heading 1 Normal 1 2 3 4 5 6 7 8 9 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 Prepare the cash payments budget: Round to the nearest dollar: 1st quarter | 2nd quarter 3rd quarter | 4th quarter total Total direct materials purchases 1st quarter 2nd quarter 3rd quarter 4th quarter total Cash payments Direct materials: Accounts payable balance, December 31, 2018 1"qtr.-qtr. 1 direct material purchases paid in qtr. 1 1" qtr.-qtr. 1 direct material purchases paid in qtr. 2 2nd qtr.- qtr. 2 direct material purchases paid in qtr. 2 2nd qtr.- qtr. 2 direct material purchases paid in qtr. 3 3rd qtr. - qtr. 3 direct material purchases paid in qtr. 3 3rd qtr. - qtr. 3 direct material purchases paid in qtr. 4 4th qtr. - qtr. 4 direct material purchases paid in qtr. 4 Total payments for direct materials Direct labor: Total payments for direct labor Manufacturing overhead: Variable manufacturing overhead Utilities, insurance, property taxes Total payments for manufacturing overhead Selling and Administrative expense: Salaries expense Rent expense Insurance expense Total payments for selling and admin. Expenses Income taxes: Total payments for income taxes Capital expenditures: Total payments for capital expenditures Total cash payments (before interest) Accounts payable balance, December 31, 2019 4th qtr.- qtr. 4 direct materials purchases Paid in qtr 1 of 2020 Prepare the cash budget: Prepare the cash budget: Tire company Cash budget For the year ended December 31, 2019 1st quarter 2nd quarter | 3rd quarter | 4th quarter total Beginning cash balance Cash receipts Cash available Cash payments: Capital expenditures Purchases of direct materials Direct labor Manufacturing overhead Selling and administrative expenses Income taxes Interest expense Total cash payments Ending cash balance before financing Minimum cash balance desired Projected cash excess (deciency) Financing: Borrowing Principal repayments Total effects of financing Ending cash balance . counting chegg.docx W Document1 + PR. Home Insert Page Layout References Review View Section Tools Calibri (Body - 12 A A O IEEEA21%AaBbccd AaBb AaBbcA= BIU. A XXAAA Normal Heading 1 Heading 2 4 3 2 1 7 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 1 2 3 4 5 6 7 9 10 11 12 Minimum cash balance desired Projected cash excess (deciency) Financing: Borrowing Principal repayments Total effects of financing Ending cash balance Tire Company Budgeted income statement For the year ended december 31, 2019 Sales revenue Cost of goods sold Gross profit Selling and administrative expenses Operating income Interest expense Income before income taxes Income tax expense Net income