GRILTON TIRE COMPANY

Balance Sheet

December 31, 2018

Assets

Current Assets: Cash $ 39,000

Accounts Receivable 40,000

Raw Materials Inventory 2,400

Finished Goods Inventory 8,700

Total Current Assets $ 90,100

Property, Plant and Equipment:

Equipment 177,000

Less: Accumulated Depreciation

(42,000)

135,000

Total Assets

$225,100

Liabilities

Current Liabilities:

Accounts Payable

$ 8,000

Stockholders Equity

Common Stock, no par

$ 130,000

Retained Earnings

87,100

Total Stockholders Equity

217,100

Total Liabilities and Stockholders Equity

$225,100

Other data for Grilton Tire Company:

a. Budgeted Sales are 1,500 for the first quarter and expected to increase by 200 tires per quarter. Cash Sales are expected to be 30% of total sales, with the remaining 70% of sales on account.

b. Finished Goods Inventory on December 31, 2018 consists of 300 tires at $29 each.

c. Desired ending Finished Goods Inventory is 40% of the next quarters sales; first quarter

sales for 2020 are expected to be 2,300 tires and second-quarter sales for 2020 are expected to be 2,500. FIFO inventory costing method is used.

d. Direct Materials cost is $8 per tire.

e. desired ending Raw Materials Inventory is 30% of the next quarters direct materials needed for production.

f. Each tire requires 0.40 hours of direct labor; direct labor costs average $16 per hour.

g. Variable manufacturing overhead is $2 per tire produced.

h. Fixed manufacturing overhead includes $4,500 per quarter in depreciation and $26,780 per quarter for other costs, such as utilities, insurance, and property taxes.

i. Fixed selling and administrative expenses include $8,000 per quarter for salaries; $1,800per quarter for rent; $1,200 per quarter for insurance; and $500 per quarter for depreciation.

j. Variable selling and administrative expenses include supplies at 2% of sales.

k. Capital expenditures include $45,000 for new manufacturing equipment, to be purchased and paid in the first quarter.

l. Cash receipts for sales on account are 60% in the quarter of sale and 40% in the quarter following the sale. The December 31, 2018 Accounts Receivable ($40,000) is received in the first quarter of 2019.

m. Direct materials purchases are paid 70% in the quarter purchased and 30% in the

following quarter. The December 31, 2018 Accounts Payable ($8,000) is paid in the first quarter of 2019.

n. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred.

o. Income tax expense is projected at $3,500 per quarter and is paid in the quarter incurreda.

p. Grilton desires to maintain a minimum cash balance of $35,000 and borrows from the local bank as needed in increments of $1,000 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. Inte rest must be paid at the beginning of each quarter.

REQUIREMENTS:

1. Prepare a sales budget in units and dollars for each quarter and in total for the year 2019. (5 pts.)

2. Prepare a schedule of expected cash collections for each quarter and in total for the year 2019. (10 pts.)

3. Prepare a production budget for each quarter and in total for the year 2019. (10 pts.)

4. Prepare a direct materials budget for each quarter and in total for the year 2019. (10 pts.)

5. Prepare a schedule of expected cash disbursements for purchases of materials for each quarter and in total of the year 2019. (10 pts.)

6. Prepare a budgeted Schedule of Cost of Goods Manufactured for the year of 2019. (5 pts.)

7. Prepare a budgeted Income Statement for the year of 2019 (10 pts.)

8. Prepare a cash budget for the year of 2019. (15 pts.)

9. Group Participation (25 pts.)