The Inexpensive Textbook Company manufactures textbooks for college

students. Inexpensive$$ s two primary products are an accounting textbook, and

an economics textbook. Inexpensive sells the books to college bookstores and all

sales are on account. The accounting text sells for $$75$; the economics text sells

for $$100.$ Inexpensive$$s highest sales volume is in the first three months of the

year as bookstores prepare for the upcoming academic year. Inexpensive$$s

balance sheet for December $31,2021$ follows:

Inexpensive Textbook Company

Balance Sheet

December $31,2021$

Assets

Current Assets:

Cash $$50,000$

Accounts Receivable $30,000$

Raw Materials Inventory $15,000$

Finished Goods Inventory $25,000$

Total Current Assets $$120,000$

Property, Plant, and Equipment:

Equipment $130,000$

Less: Accumulated

Depreciation

$(50,000)80,000$

Total Assets $$200,00$

Liabilities

Current Liabilities:

Accounts Payable $$20,000$

Stockholders$$ Equity

Common Stock $$100,000$

Retained Earnings $80,000$

Total Stockholders$$ Equity $149,500$

Total Liabilities and Stockholders$$ Equity $$200,000$

Other data for Inexpensive Textbook Company:

I. Operating Budget Data

A$.$ Budgeted sales are $5,000$ accounting text and $3,000$ economic texts.

B$.$ Finished Goods Inventory on December $31$ consists of $500$ accounting

text at $$25$ each and $1,000$ economics at $$50$ each.

C$.$ Desired ending Finished Goods Inventory is $500$ accounting text and $500$

economic texts; FIFO inventory costing method is used.

D$.$ Direct materials cost is $$15$ per accounting text and $$25$ per economics

text.

E$.$ Desired ending Raw Materials Inventory is $$20,555($indirect materials

are insignificant and not considered for budgeting purposes$).$

F$.$ Each bat requires $1\mathrm{.}0$ hours of direct labor; direct labor costs average

$$20$ per hour.

G$.$ Variable manufacturing overhead is $$2\mathrm{.}50$ per book.

H$.$ Fixed manufacturing overhead includes $$1,000$ per quarter in

depreciation and $$5,000$ per quarter for other costs, such as insurance

and property taxes.

I. Fixed selling and administrative expenses include $$15,000$ per quarter for

salaries; $$5,000$ per quarter for rent; $$2,000$ per quarter for insurance;

and $$500$ per quarter for depreciation.

J$.$ Variable selling and administrative expenses include supplies at $2\%$ of

sales.

II$.$ Financial Budget Data

A$.$ Capital expenditures include $$25,000$ for new manufacturing equipment,

to be purchased and paid in the first quarter.

B$.$ Cash receipts are $50\%$ of sales in the quarter of sale and $50\%$ in the

quarter following the sale.

C$.$ Direct materials purchases are paid $40\%$ in the quarter purchased and

$60\%$ in the next quarter.

D$.$ Direct labor, manufacturing overhead, and selling and administrative

costs are paid in the quarter incurred.

E$.$ Income tax expense for the first quarter is projected at $$30,000$ and is

paid in the quarter incurred.

F$.$ Inexpensive expects to have adequate cash funds and does not

anticipate borrowing in the first quarter.

Inexpensive Textbook Company

Budgeted Statement of Cash Flows

For the First Quarter of $2022$