- What amount of borrowing, if any, should appear as a short-term liability on the budgeted balance sheet to achieve the target cash balance?
Answer: $14,000
Calculate cash position before borrowing: Beginning cash $28,000 + Customer receipts $275,000 + Equipment sale $8,000 - Operating payments $240,000 - Capital expenditures $35,000 = $36,000. To reach target of $50,000, borrowing needed = $50,000 - $36,000 = $14,000. Choice A ignores the shortfall. Choice C incorrectly omits the equipment sale proceeds. Choice D incorrectly calculates the shortfall by omitting customer receipts or making other computational errors.
- Horizon Ltd is developing its budgeted balance sheet. The company's budgeted income statement shows: Sales revenue $680,000; Cost of goods sold $408,000; Operating expenses $195,000; Interest expense $8,000; Income tax expense $20,700. The company's beginning total stockholders' equity was $425,000. During the budget period, the company plans to pay dividends of $30,000 and issue additional common stock for $60,000. What should be the total stockholders' equity on the budgeted balance sheet?
Answer: $513,300
First calculate net income: $680,000 - $408,000 - $195,000 - $8,000 - $20,700 = $48,300. Then: Beginning equity $425,000 + Net income $48,300 - Dividends $30,000 + Stock issuance $60,000 = $513,300. Choice A incorrectly omits the stock issuance. Choice C incorrectly omits the dividend payment. Choice D incorrectly adds back the dividend payment instead of subtracting it.
- Pinnacle Industries is preparing its budgeted balance sheet and has the following information: Beginning retained earnings $185,000; Budgeted net income $67,000; Planned dividend payments $18,000; Treasury stock purchases $12,000; Additional paid-in capital increase $25,000. The company also plans to issue $40,000 in new common stock. What amount should appear as retained earnings on the budgeted balance sheet?
Answer: $234,000
Ending retained earnings = Beginning retained earnings + Net income - Dividends = $185,000 + $67,000 - $18,000 = $234,000. Treasury stock purchases, additional paid-in capital, and new stock issuances affect other equity accounts but not retained earnings. Choice B incorrectly adds back treasury stock purchases. Choice C incorrectly includes the additional paid-in capital increase. Choice D incorrectly includes all equity transactions as affecting retained earnings.
- What is the budgeted ending finished goods inventory that should appear on the budgeted balance sheet?
Answer: $33,000
To find budgeted ending finished goods inventory, use: Beginning FG + COGM - COGS = Ending FG. First calculate COGS: Sales revenue $320,000 × (100% - 40% gross margin) = $192,000. Then: $45,000 + $180,000 - $192,000 = $33,000. Choice B incorrectly uses gross profit ($128,000) instead of COGS. Choice C incorrectly adds gross profit to beginning inventory. Choice D incorrectly subtracts gross margin percentage from COGM.
- Atlas Corporation is preparing its budgeted balance sheet and income statement. Budget data shows: Beginning accounts payable $65,000; Purchases on account $298,000; Cash payments to suppliers $285,000; Beginning accrued wages $12,000; Wage expense for the period $87,000; Cash payments for wages $83,000; Other operating expenses $45,000 (all paid in cash). What total amount should appear as current operating liabilities on the budgeted balance sheet?
Answer: $94,000
Calculate ending accounts payable: $65,000 + $298,000 - $285,000 = $78,000. Calculate ending accrued wages: $12,000 + $87,000 - $83,000 = $16,000. Total current operating liabilities = $78,000 + $16,000 = $94,000. Note that other operating expenses were paid in cash, so they don't create liabilities. Choice A includes only accounts payable. Choice C incorrectly adds some portion of the cash payments. Choice D incorrectly treats the other operating expenses as creating a liability.
- Sterling Corp is preparing budgeted financial statements. The company's budgeted income statement shows net income of $89,000. Additional budget information: Depreciation expense $15,000; Accounts receivable increase $8,000; Inventory decrease $12,000; Accounts payable increase $6,000; Accrued liabilities decrease $4,000. Beginning cash was $31,000. What amount should appear as ending cash on the budgeted balance sheet?
Answer: $141,000
Calculate cash from operations using indirect method: Net income $89,000 + Depreciation $15,000 - AR increase $8,000 + Inventory decrease $12,000 + AP increase $6,000 - Accrued liabilities decrease $4,000 = $110,000 cash from operations. Ending cash = Beginning cash $31,000 + Cash from operations $110,000 = $141,000. Choice B incorrectly adds the accrued liabilities decrease. Choice C incorrectly adds the AR increase instead of subtracting it. Choice D incorrectly treats all working capital changes as positive.
- Meridian Corp is preparing its budgeted balance sheet. Budgeted sales are $450,000, with 30% collected in the current period and 70% in the following period. Beginning accounts receivable is $89,000, representing sales from the previous period that will be collected in the current period. Beginning cash is $22,000. Total budgeted cash receipts are $404,000. What amount should appear as accounts receivable on the budgeted balance sheet?
Answer: $315,000
Ending accounts receivable equals current period sales that won't be collected until next period: $450,000 × 70% = $315,000. This represents the portion of current sales that extends into the next period. Choice A incorrectly calculates only the portion collected this period. Choice B appears to add beginning AR to the uncollected portion but uses wrong percentages. Choice D incorrectly uses total cash receipts, which includes collections from prior periods.
