Question
Problem 10-2 The results of operations for the Penny Worth Bug Spray Manufacturing Company for the fourth quarter of 2017 were as follows (in thousands):
Problem 10-2
The results of operations for the Penny Worth Bug Spray Manufacturing Company for the fourth quarter of 2017 were as follows (in thousands):
Sales of bug spray
$580,000Less variable cost of goods sold
324,800Contribution margin
255,200
Less fixed bug removal costs
$81,200
Less fixed selling and administrative expenses
34,800116,000Income before taxes
139,200Less taxes on income
55,680Net income
$83,520
Note:Penny Worth uses the variable costing method. Thus, only variable costs are included in the cost of goods sold. Fixed costs are charged to expense in the period incurred.
The company's balance sheet as of the end of the fourth quarter of 2017 was as follows (in thousands):
Assets:
Cash
$34,200Accounts receivable
290,000Total current assets
324,200
Fixtures and equipment
$140,000Less accumulated depreciation
70,00070,000Total assets
$394,200
Liabilities and owners' equity:
Accounts payable
$51,968Retained earnings
234,832Common stock
107,400Total liabilities and owners' equity$394,200
Additional information:
1.Sales and variable costs of sales are expected to increase by 5 percent in the next quarter.
2.All sales are on credit with 50 percent collected in the quarter of sale and 50 percent collected in the following quarter.3.Variable cost of sales consists of 40 percent materials, 38 percent direct labor, and 22 percent variable overhead. Materials are purchased on credit. 60 percent are paid for in the quarter of purchase, and the remaining amount is paid for in the quarter after purchase. There is no inventory. Also, direct labor and variable overhead costs are paid in the quarter the expenses are incurred.4.Fixed bug removal costs (other than $4,530 of depreciation expense) are expected to increase by 1.50 percent. Fixed bug removal costs requiring payment are paid in the quarter they are incurred.5.Fixed selling and administrative costs (other than $3,100 of depreciation expense) are expected to increase by 2 percent. Fixed selling and administrative costs requiring payment are paid in the quarter they are incurred.6.The tax rate is expected to be 40 percent. All taxes are paid in the quarter they are incurred.
7.No purchases of fixtures or equipment are expected in the first quarter of 2018.
budgeted income statement for the first quarter of 2018.(Round fixed bug removal costs to 3 decimal places, e.g. 0.100 and final answers to 0 decimal places, e.g. 5,275.)
Penny Worth Bug Spray Manufacturing Company
Budgeted Income Statement
March 31, 2018
For the Year Ended March 31, 2018
For the Quarter Ended March 31, 2018
Net income/(loss)
Variable cost of goods sold
Income before taxes
Contribution margin
Sales of bug spray
Fixed bug removal costs
Fixed selling and administrative expenses
Taxes on income
$
Less
Add
:
Sales of bug spray
Fixed bug removal costs
Taxes on income
Net income/(loss)
Variable cost of goods sold
Contribution margin
Fixed selling and administrative expenses
Income before taxes
Taxes on income
Sales of bug spray
Variable cost of goods sold
Net income/(loss)
Contribution margin
Fixed bug removal costs
Income before taxes
Fixed selling and administrative expenses
Add
Less
:
Taxes on income
Income before taxes
Fixed bug removal costs
Fixed selling and administrative expenses
Net income/(loss)
Sales of bug spray
Contribution margin
Variable cost of goods sold
$
Net income/(loss)
Income before taxes
Variable cost of goods sold
Taxes on income
Sales of bug spray
Contribution margin
Fixed bug removal costs
Fixed selling and administrative expenses
Fixed bug removal costs
Variable cost of goods sold
Fixed selling and administrative expenses
Income before taxes
Net income/(loss)
Taxes on income
Sales of bug spray
Contribution margin
Add
Less
:
Taxes on income
Fixed selling and administrative expenses
Variable cost of goods sold
Net income/(loss)
Sales of bug spray
Contribution margin
Fixed bug removal costs
Income before taxes
Sales of bug spray
Variable cost of goods sold
Net income/(loss)
Contribution margin
Fixed bug removal costs
Fixed selling and administrative expenses
Taxes on income
Income before taxes
$
budgeted statement of cash budget for the first quarter of 2018.
Penny Worth Bug Spray Manufacturing Company
Cash Budget
For the First Quarter, 2018
Payment for fixed selling and administrative expense
Cash collected from sales
Cash payments
Payment of income taxes
Payment for labor
Beginning cash balance
Excess/(deficiency) of receipts over disbursements
Ending cash balance
Payment of material
Payment for variable overhead
Depreciation of equipment
In quarter 4, 2017
In quarter 1, 2018
Payment for fixed bug removal costs
:
In quarter 1, 2018
Beginning cash balance
Depreciation of equipment
Payment of income taxes
In quarter 4, 2017
Payment for labor
Ending cash balance
Cash collected from sales
Cash payments
Payment for fixed bug removal costs
Payment of material
Payment for variable overhead
Payment for fixed selling and administrative expense
Excess/(deficiency) of receipts over disbursements
$
Ending cash balance
Payment of income taxes
Payment for variable overhead
Excess/(deficiency) of receipts over disbursements
Depreciation of equipment
In quarter 4, 2017
Payment for fixed bug removal costs
Cash collected from sales
In quarter 1, 2018
Cash payments
Payment for labor
Payment of material
Payment for fixed selling and administrative expense
Beginning cash balance
$
Cash collected from sales
Payment for variable overhead
Payment for fixed bug removal costs
Payment for fixed selling and administrative expense
Payment of income taxes
Excess/(deficiency) of receipts over disbursements
Beginning cash balance
Payment of material
Ending cash balance
Cash payments
Depreciation of equipment
In quarter 4, 2017
In quarter 1, 2018
Payment for labor
:
Excess/(deficiency) of receipts over disbursements
Payment for fixed bug removal costs
Beginning cash balance
Ending cash balance
Depreciation of equipment
Cash payments
Cash collected from sales
In quarter 1, 2018
In quarter 4, 2017
Payment for labor
Payment of income taxes
Payment for variable overhead
Payment for fixed selling and administrative expense
Payment of material
Beginning cash balance
In quarter 1, 2018
In quarter 4, 2017
Cash payments
Payment of material
Ending cash balance
Payment for fixed bug removal costs
Payment for labor
Payment for variable overhead
Depreciation of equipment
Cash collected from sales
Payment for fixed selling and administrative expense
Payment of income taxes
Excess/(deficiency) of receipts over disbursements
Excess/(deficiency) of receipts over disbursements
Payment for fixed bug removal costs
In quarter 4, 2017
Payment for fixed selling and administrative expense
Cash collected from sales
Depreciation of equipment
In quarter 1, 2018
Cash payments
Payment for labor
Beginning cash balance
Ending cash balance
Payment of material
Payment for variable overhead
Payment of income taxes
Ending cash balance
In quarter 4, 2017
In quarter 1, 2018
Payment for labor
Payment for variable overhead
Excess/(deficiency) of receipts over disbursements
Payment for fixed bug removal costs
Payment for fixed selling and administrative expense
Payment of income taxes
Beginning cash balance
Cash collected from sales
Payment of material
Depreciation of equipment
Cash payments
Payment of material
Cash collected from sales
Payment for fixed bug removal costs
Depreciation of equipment
Cash payments
Payment of income taxes
In quarter 4, 2017
Beginning cash balance
Payment for fixed selling and administrative expense
Excess/(deficiency) of receipts over disbursements
Ending cash balance
In quarter 1, 2018
Payment for labor
Payment for variable overhead
Beginning cash balance
Payment for labor
In quarter 4, 2017
Ending cash balance
Depreciation of equipment
Payment for fixed selling and administrative expense
Excess/(deficiency) of receipts over disbursements
Payment of income taxes
Payment of material
Cash collected from sales
Cash payments
In quarter 1, 2018
Payment for variable overhead
Payment for fixed bug removal costs
Beginning cash balance
Payment for fixed selling and administrative expense
Cash payments
Ending cash balance
Payment of material
In quarter 4, 2017
In quarter 1, 2018
Payment for labor
Payment for variable overhead
Depreciation of equipment
Cash collected from sales
Payment for fixed bug removal costs
Payment of income taxes
Excess/(deficiency) of receipts over disbursements
Payment of material
Cash collected from sales
Payment for labor
Payment for variable overhead
Depreciation of equipment
Payment of income taxes
Payment for fixed bug removal costs
Excess/(deficiency) of receipts over disbursements
Payment for fixed selling and administrative expense
Beginning cash balance
Cash payments
Ending cash balance
In quarter 4, 2017
In quarter 1, 2018
Depreciation of equipment
Payment for fixed selling and administrative expense
Payment of material
Payment for labor
Beginning cash balance
In quarter 4, 2017
Excess/(deficiency) of receipts over disbursements
Ending cash balance
Cash collected from sales
In quarter 1, 2018
Payment of income taxes
Cash payments
Payment for variable overhead
Payment for fixed bug removal costs
Add
Less
:
Depreciation of equipment
Payment for labor
In quarter 1, 2018
Excess/(deficiency) of receipts over disbursements
Payment for variable overhead
Payment for fixed bug removal costs
In quarter 4, 2017
Beginning cash balance
Payment for fixed selling and administrative expense
Payment of income taxes
Cash payments
Ending cash balance
Cash collected from sales
Payment of material
In quarter 1, 2018
Beginning cash balance
Excess/(deficiency) of receipts over disbursements
Payment for fixed bug removal costs
Payment for fixed selling and administrative expense
Cash collected from sales
Payment of material
Payment of income taxes
Ending cash balance
In quarter 4, 2017
Depreciation of equipment
Cash payments
Payment for labor
Payment for variable overhead
$
budgeted balance sheet as of the end of the first quarter of 2018.(List assets in order of liquidity. Round answers to 0 decimal places, e.g. 5,275.)
Penny Worth Bug Spray Manufacturing Company
Budgeted Balance Sheet
March 31, 2018
For the Year Ended March 31, 2018
For the Quarter Ended March 31, 2018
Assets
Current Assets
Intangible Assets
Liabilities
Long-term Investments
Long-term Liabilities
Net Income / (Loss)
Property, Plant and Equipment
Stockholders' Equity
Total Assets
Total Current Assets
Total Intangible Assets
Total Liabilities
Total Liabilities and Stockholders' Equity
Total Long-term Investments
Total Long-term Liabilities
Total Property, Plant and Equipment
Total Stockholders' Equity
$
Current Assets
Intangible Assets
Liabilities
Long-term Investments
Long-term Liabilities
Net Income / (Loss)
Property, Plant and Equipment
Stockholders' Equity
Total Assets
Total Current Assets
Total Intangible Assets
Total Liabilities
Total Liabilities and Stockholders' Equity
Total Long-term Investments
Total Long-term Liabilities
Total Property, Plant and Equipment
Total Stockholders' Equity
Add
Less
:
Current Assets
Intangible Assets
Liabilities
Long-term Investments
Long-term Liabilities
Net Income / (Loss)
Property, Plant and Equipment
Stockholders' Equity
Total Assets
Total Current Assets
Total Intangible Assets
Total Liabilities
Total Liabilities and Stockholders' Equity
Total Long-term Investments
Total Long-term Liabilities
Total Property, Plant and Equipment
Total Stockholders' Equity
$
Liabilities and Stockholders' Equity
Current Assets
Intangible Assets
Liabilities
Long-term Investments
Long-term Liabilities
Net Income / (Loss)
Property, Plant and Equipment
Stockholders' Equity
Total Assets
Total Current Assets
Total Intangible Assets
Total Liabilities
Total Liabilities and Stockholders' Equity
Total Long-term Investments
Total Long-term Liabilities
Total Property, Plant and Equipment
Total Stockholders' Equity
$
Current Assets
Intangible Assets
Liabilities
Long-term Investments
Long-term Liabilities
Net Income / (Loss)
Property, Plant and Equipment
Stockholders' Equity
Total Assets
Total Current Assets
Total Intangible Assets
Total Liabilities
Total Liabilities and Stockholders' Equity
Total Long-term Investments
Total Long-term Liabilities
Total Property, Plant and Equipment
Total Stockholders' Equity
Current Assets
Intangible Assets
Liabilities
Long-term Investments
Long-term Liabilities
Net Income / (Loss)
Property, Plant and Equipment
Stockholders' Equity
Total Assets
Total Current Assets
Total Intangible Assets
Total Liabilities
Total Liabilities and Stockholders' Equity
Total Long-term Investments
Total Long-term Liabilities
Total Property, Plant and Equipment
Total Stockholders' Equity
Current Assets
Intangible Assets
Liabilities
Long-term Investments
Long-term Liabilities
Net Income / (Loss)
Property, Plant and Equipment
Stockholders' Equity
Total Assets
Total Current Assets
Total Intangible Assets
Total Liabilities
Total Liabilities and Stockholders' Equity
Total Long-term Investments
Total Long-term Liabilities
Total Property, Plant and Equipment
Total Stockholders' Equity
Current Assets
Intangible Assets
Liabilities
Long-term Investments
Long-term Liabilities
Net Income / (Loss)
Property, Plant and Equipment
Stockholders' Equity
Total Assets
Total Current Assets
Total Intangible Assets
Total Liabilities
Total Liabilities and Stockholders' Equity
Total Long-term Investments
Total Long-term Liabilities
Total Property, Plant and Equipment
Total Stockholders' Equity
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Taxation Of Individuals And Business Entities 2015
Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver
6th Edition
978-1259206955, 1259206955, 77862368, 978-0077862367
