Question

HW chapter 22 Question 1 Ruler's March 31, 2014, balance sheet follows: Ruler Office Supply Balance Sheet March 31, 2014 Assets Current Assets Cash 32.000 Accounts Receivable 20,000 Merchandise Inventory 17.500 Prepaid Insurance 1.700 Total Current Assets 71.200 Property. Plant, and Equipment Equipment and Fixtures 55.000 Less: Accumulated Depreciation (26,000) 29,000 Total Assets $ 100.200 Liabilities Current Liabilities: Accounts Payable $ 10,000 Salaries and Commissions Payable 3,600 Total Liabilities $ 13.600 Stockholders' Equity Common Stock 13.000 Retained Eamings 73,600 Total Stockholders' Equity 86,600 $ 100.200 Total Liabilities and Stockholders' Equity The budget committee of Ruler Office Supply has assembled the following data a Sales in April are expected to be $60,000. Ruler forecasts that monthly sales will increase 2% over April sales in May June's sales will increase by 45 over April sales. Jy sales will increase 20% over April sales. Cash receipts are 80% in the month of the sale and 20% in the month following the sale b Ruler maintains inventory of $10.000 plus 25% of the cost of goods sold budgeted for the following month cost of goods sold equal 50% of sales revenue Purchases are paid 70% in the month of purchase and 30in the month following the purchase c. Monthly salaries amount to S7000. Sales comissions equal of sales for the month Salaries and commissions are paid 70% in the month incurred and 30% in the following month d Other monthly expenses are as follows: • Rent $2.500, paid as incurred • Depreciation $700 • Insurance: $300, expiration of prepaid amount • Income tax $2,300 paid as incurred Requirements 1. Prepare Ruler's sales budget for April and May 2014. Round al amounts to the nearest $1 2. Prepare Ruler's inventory purchases, and cost of goods sold budget for April and May 3. Prepare Ruler's seling and administrative expense budget for April and May

Answer 1

1.

Ruler Office Supply Sales Budget
	April	May	Total
Budgeted Sales	$ 60,000	$ 61,200	$ 121,200

2.

Ruler Office Supply Inventory, Purchases and Cost of Goods Sold Budget April and May 2014
	April	May	Total
Cost of Goods Sold	$ 30,000	$ 30,600	$ 60,600
Add: Desired ending merchandise inventory	17,650	17,800	17,800
Total merchandise inventory needed	47,650	48,400	78,400
Less: Beginning merchandise inventory	17,500	17,650	17,500
Budgeted Purchases	$ 30,150	$ 30,750	$ 60,900

3.

Ruler Office Supply Selling and Administrative Expense Budget April and May 2014
	April	May	Total
Variable Expenses
Sales Commission Expense	$ 3,000	$ 3,060	$ 6,060
Fixed Expenses
Salaries Expense	7,000	7,000	14,000
Rent Expense	2,800	2,800	5,600
Depreciation Expense	700	700	1,400
Insurance Expense	300	300	600
Total Fixed Expenses	10,800	10,800	21,600
Total Selling and Administrative Expenses	$ 13,800	$ 13,860	$ 27,660