The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2019: ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2019 Assets Cash 40,000 Accounts receivable Raw materials inventory Finished goods inventory Total current assets 342,248 98,500 325,540 806,288 600,000 (150,000) Equipment Accumulated depreciation Equipment, net 450,000 $1,256,288 Total assets Liabilities and Equity $ 200,500 12,000 212,500 500,000 712,500 335,000 208,788 Accounts payable Short-term notes payable Total current liabilities Long-term note payable Total liabilities Common stock Retained earnings Total stockholders' equity 543,788 Total liabilities and equity $1,256,288 To prepare a master budget for April, May, and June of 2019, management gathers the following information. a. Sales for March total 20,500 units. Forecasted sales in units are as follows: April, 20,500; May, 19,500; June, 20,000; and July, 20,500. Sales of 240,000 units are forecasted for the entire year. The product's selling price is $23.85 per unit and its total product cost is $19.85 per unit. b. Company policy calls for a given month's ending raw materials inventory to equal 50% of the next month's materials requirements. The March 31 raw materials inventory is 4,925 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,000 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials. c. Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's expected unit sales. The March 31 finished goods inventory is 16,400 units, which complies with the policy. d. Each finished unit requires 0.50 hours of direct labor at a rate of $15 per hour e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $2.70 per direct labor hour. Depreciation of $20,000 per month is treated as fixed factory overhead. f. Sales representatives' commissions are 8% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,000. g. Monthly general and administrative expenses include $12,000 administrative salaries and 0.9% monthly interest on the long-term note payable. h. The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none are collected in the month of the sale). i. All raw materials purchases are on credit, and no payables arise from any other transactions. One month's raw materials purchases are fully paid in the next month j. The minimum ending cash balance for all months is $40,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance k. Dividends of $10,000 are to be declared and paid in May. I. No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 35% in the quarter and paid in the third calendar quarter. m. Equipment purchases of $130,000 are budgeted for the last day of June. Required: Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the second calendar quarter, except as otherwise noted below. (Round calculations up to the nearest whole dollar, except for the amount of cash sales, which should be rounded down to the nearest whole dollar.): Calculation of Cash receipts from customers: April May June Total budgeted sales Cash sales 30% 70% Sales on credit Total cash receipts from customers April May June Current month's cash sales Collections of receivables 0 0 0 Total cash receipts Cash Budget April, May, and June 2019 April May June Beginning cash balance Cash receipts from customers Total cash available 83,346$ 481,770 40,000 $ 124,295 488,925 468,653 528,925 565,116 592,948 Cash payments for 198,000 200,500 Raw materials 201,500 147,750 Direct labor 149,250 153,000 27,540 38,160 26,865 37,206 3,000 Variable overhead 26,595 Sales commissions 39,114 3,000 Sales salaries 3,000 12,000 General & administrative salaries 12,000 12,000 Dividends Loan interest 120 4,500 Long-term note interest 4,500 4,500 Purchases of equipment Total cash payments 433,579 430,821 439,700 Preliminary cash balance Additional loan (loan repayment) 95,346 124,295 23,248 124,295 $ 83,346 23,248 Ending cash balance Loan balance April May June Loan balance - Beginning of month Additional loan (loan repayment) $ Loan balance - End of month EA The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2019: ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2019 Assets Cash 40,000 Accounts receivable Raw materials inventory Finished goods inventory Total current assets 342,248 98,500 325,540 806,288 600,000 (150,000) Equipment Accumulated depreciation Equipment, net 450,000 $1,256,288 Total assets Liabilities and Equity $ 200,500 12,000 212,500 500,000 712,500 335,000 208,788 Accounts payable Short-term notes payable Total current liabilities Long-term note payable Total liabilities Common stock Retained earnings Total stockholders' equity 543,788 Total liabilities and equity $1,256,288 To prepare a master budget for April, May, and June of 2019, management gathers the following information. a. Sales for March total 20,500 units. Forecasted sales in units are as follows: April, 20,500; May, 19,500; June, 20,000; and July, 20,500. Sales of 240,000 units are forecasted for the entire year. The product's selling price is $23.85 per unit and its total product cost is $19.85 per unit. b. Company policy calls for a given month's ending raw materials inventory to equal 50% of the next month's materials requirements. The March 31 raw materials inventory is 4,925 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,000 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials. c. Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's expected unit sales. The March 31 finished goods inventory is 16,400 units, which complies with the policy. d. Each finished unit requires 0.50 hours of direct labor at a rate of $15 per hour e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $2.70 per direct labor hour. Depreciation of $20,000 per month is treated as fixed factory overhead. f. Sales representatives' commissions are 8% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,000. g. Monthly general and administrative expenses include $12,000 administrative salaries and 0.9% monthly interest on the long-term note payable. h. The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none are collected in the month of the sale). i. All raw materials purchases are on credit, and no payables arise from any other transactions. One month's raw materials purchases are fully paid in the next month j. The minimum ending cash balance for all months is $40,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance k. Dividends of $10,000 are to be declared and paid in May. I. No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 35% in the quarter and paid in the third calendar quarter. m. Equipment purchases of $130,000 are budgeted for the last day of June. Required: Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the second calendar quarter, except as otherwise noted below. (Round calculations up to the nearest whole dollar, except for the amount of cash sales, which should be rounded down to the nearest whole dollar.): Calculation of Cash receipts from customers: April May June Total budgeted sales Cash sales 30% 70% Sales on credit Total cash receipts from customers April May June Current month's cash sales Collections of receivables 0 0 0 Total cash receipts Cash Budget April, May, and June 2019 April May June Beginning cash balance Cash receipts from customers Total cash available 83,346$ 481,770 40,000 $ 124,295 488,925 468,653 528,925 565,116 592,948 Cash payments for 198,000 200,500 Raw materials 201,500 147,750 Direct labor 149,250 153,000 27,540 38,160 26,865 37,206 3,000 Variable overhead 26,595 Sales commissions 39,114 3,000 Sales salaries 3,000 12,000 General & administrative salaries 12,000 12,000 Dividends Loan interest 120 4,500 Long-term note interest 4,500 4,500 Purchases of equipment Total cash payments 433,579 430,821 439,700 Preliminary cash balance Additional loan (loan repayment) 95,346 124,295 23,248 124,295 $ 83,346 23,248 Ending cash balance Loan balance April May June Loan balance - Beginning of month Additional loan (loan repayment) $ Loan balance - End of month EA
