Question

The Gridley Tire Company manufactures racing tires for bicycles. Gridley sells tires for $75 each Gridley is planning for the next year by developing a master budget by quarters. Gridley's balance sheet for December 31, 2018, follows (Click the icon to view the balance sheet) Other data for Gridley Tire Company i Clck he icon to view the other data) Read the repuiremens. Revew the sales budget you prepared above Cash Receipts from Customers Third First Second Fourth Quarter Quarter Quarter Quarter Total Total sales First Second Third Fourth Quarter Quarter Quarter Quarter Total Cash Receipts from Customers: Accounts Receivable balance. December 31, 2018 1st Qtr-Cash sales 1st Otr-Credit sales, collection of Qtr. 1 sales in Qtr. 1 1st Qtr-Credit sales, collection of Qtr. 1 sales in Qtr 2 2nd Qtr-Cash sales

Answer 1

Answer is given below with full working

1.a. Sales Budget Quarter II 1,500 Sales units Selling price per tie Sales value - (units x $75) Quarter 1,300 $75 $97,500 $75 Quarter III Quarter IV Full year 1,700 1,900 6,400 $75 $75 $127,500 $142,500 $480,000 $75 $112,500 b. Schedule of Cash collected from Customers Quarter 19,500 78,000 Quarter II 22,500 90,000 Quarter III Quarter IV 25,500 28,500 102,000 114,000 Full year 96,000 384,000 25,500 28,500 19,500 46,800 Cash Sales - 20% Sales on Account - 80% Collection from Customers Cash Sales Quarter! Quarter 11 Quarter III Quarter IV Opening Accounts Receivable Opening balance Cash received from Debtors 22,500 31,200 54,000 36,000 61,200 96,000 78,000 90,000 102,000 68,400 40,800 68,400 35,000 101,300 35,000 469,400 107,700 122,700 137,700 C. Production Budget - Units 2020 Quarter! 2100 Budgeted Unit sales Add: Desired Closing inventory Quarter 1,300 300 1,600 700 900 Quarter II Quarter III Quarter IV 1,500 1,700 1,900 3401 380 420 1,840 2,080 2,320 300 3401 380 1,540 1,740 1,940 Full year 6,400 420 6,820 700 6,120 2,100 420 Less Opening Stock Total Production in units 1,680 Purchase Budget - Units Budgeted Units needed for production Add: Desired Closing inventory Quarter 1,800 924 2,7241 1,400 1,324 Quarter II 3,080 1,044 4,124 924 3,2001 Quarter III Quarter IV Full year 3,480 3,880 12,240 1,164 1,400 1,400 4,644 13,640 1,044 1,400 3,600 4,1161 12,240 5 280 Less Opening Stock Total Purchase in Units Purchase Budget in value Quarter 1,324 5,296 Total Purchase Purchase value budget - $ 4 per unit Quarter II 3,200 12,800 Quarter III Quarter IV 3,600 14,400 16,464 4,116 Full year 12,240 48,960 d. Schedule of Cash payment for purchases Quarter 5,296 Quarter II 12,800 Quarter III Quarter IV 14,400 16,464 Full year 48,960 3,707 1,589 8,960 Purchases Payment Quarter Quarter 11 Quarter 111 Quarter IV Opening Accounts Payable balance Total payment for purchases 3,840 10,080 4,320 11,525 5,296 12,800 14,400 11,525 10,000 54,021 10,000 13,707 10,549 13,920 15,845 Direct Labor Cost Budget Full year 6,120 Production Direct labor hours per unit Total Direct Labor hours for production Labor cost per hour Direct Labor Cost Budget Quarter 900 0.30 270 $25 6,750 Quarter 11 1,540 0.30 462 $25 11,550 Quarter III Quarter IV 1,740 1,940 0.30 0.30 522 582 $25 $25 13,050 14,550 1,836 45,900 Manufacturing Overhead Budget Variable Manufacturing Overhead Fixed Manufacturing Overhead Budget-Cash Total Manufacturing Overhead in Cash Depreciation - non cash Total Manufacturing Overhead Budget Quarter 2,700 1,590 4,290 3,000 7,290 Quarter II 4,620 1,590 6,210 3,000 9,210 Quarter III Quarter IV Full year 5,220 5,820 18,360 1,590 1,5901 6,360 6,810 7,410 24,720 3,000 3,000 12,000 9,810 10,410 36,720 Selling and administration expense Budget Quarter 2,925 Quarter II 3,375 Quarter III Quarter IV 4,275 Full year 14,400 3,825 Variable Selling and administrative expense - 3% |Fixed Selling and administrative expense Salaries Rent Insurance Selling and administration expense - Cash Depreciation - non cash Total Selling and administration expenses 9,000 4,200 1,500 17,625 1,000 18,625 9,000 4,200 1,500 18,075 1,000 19,075 9,000 4,200 1,500 18,525 1,000 19,525 9,000 4,200 1,500 18,975 1,000 19,975 36,000 16,800 6,000 58,800 4,000 62,800 Cash Budget 2. Quarter $55,000 Quarter II $91,428 Quarter III Quarter IV $150,244 $218,139 Full Year $55,000 101,300 $156,300 107,700 $199,128 122,700 $272,944 137,700 $355,839 469,400 $524,400 13,9201 13,050 10,549 11,550 6,210 18,075 15,845 14,550 7,410 18,975 6,810 18,525 Beginning balance Receipt of Cash Cash received from debtors Cash available for disbursement Cash disbursements Merchandise purchase Direct Labor Manufacturing Overhead Selling and administration expense New Equipment Income tax Cash paid for disbursements Excess (deficiency of) of cash available over disbursements Financing Borrowings Repayments Interest (at 10% per year) Total financing Ending cash balance 13,707 6,750 4,290 17,625 20,000 2,500 $64,872 $91,428 54,021 45,900 24,720 73,200 20,000 10,000 $227,841 $296,559 2,500 $48,884 $150,244 2,500 $54,805 $218,139 2,500 $59,280 $296,559 $91,428 $150,244 $218,139 $296,559 $296,559 No borrowing needed since minimum cash requirement is maintained

$480,000 Gridley Tire Company Budgeted Income Statement For the year ended December 2019 Sales Opening stock Direct Material Direct Labor Manufacturing expenses Cost of goods sold available for sale Less: Closing stoc! Cost of goods sold $16,800 $48,960 $45,900 $36,720 $148,380 $9,030 $139,350 $340,650 Gross profit Variable Selling and administrative expense Salaries Rent Insurance Depreciation $14,400 $36,000 $16,800 $6,000 $4,000 $77,200 $263,450 $0 Net operating income Interest expense Income before tax Тах Net Income after tax $263,450 $10,000 $253,450 Gridley Tire Company Budgeted Balance Sheet For the year ended December 2019 Assets Current Assets Cash Accounts receivable Raw Material Inventory Finished Goods Inventory Total Current Assets Fixed Assets Property and Equipment Add: Purchases $296,559 $45,600 $5,600 $9,030 $356,789 $206,000 $20,000 $226,000 $110,000 $116,000 $472,789 Less : Accumulated Depreciation Total Assets Current liabilities Accounts payable $4,939 Stockholders' equity Common stock Retained earnings Total Stockholders' Equity $160,000 $307,850 $467,850 Total Liabilities and Stockholders' Equity $472,789 Budgeted Statement of Retained Earnings Retained earnings Add: Net profit Closing balance of Retained earnings 54,400 253,450 307,850