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McGuire Corporation began operations in 2018. The company purchases computer equipment from manufacturers and then sells to retail stores. During 2018, the bookkeeper used a check register to record all cash receipts and cash disbursements. No other journals were used. The following is a recap of the cash receipts and disbursements made during the year.

Cash receipts:
Sale of common stock $ 67,500
Collections from customers 320,000
Borrowed from local bank on April 1, note signed requiring
principal and interest at 12% to be paid on March 31, 2019 34,000
Total cash receipts $ 421,500
Cash disbursements:
Purchase of merchandise $ 195,000
Payment of salaries and wages 76,000
Purchase of office equipment 40,500
Payment of rent on building 10,500
Miscellaneous expenses 12,200
Total cash disbursements $ 334,200


You are called in to prepare financial statements at December 31, 2018. The following additional information was provided to you:

Customers owed the company $19,000 at year-end.

At year-end, $29,400 was still due to suppliers of merchandise purchased on credit.

At year-end, merchandise inventory costing $46,400 still remained on hand.

Salaries and wages owed to employees at year-end amounted to $5,100.

On December 1, $3,150 in rent was paid to the owner of the building used by McGuire. This represented rent for the months of December through February.

The office equipment, which has a 10-year life and no salvage value, was purchased on January 1, 2018. Straight-line depreciation is used.


Required:

Prepare an income statement for 2018 and a balance sheet as of December 31, 2018. (For Balance Sheet only, items to be deducted must be indicated with a negative amount.)

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Jarrod Robel
Jarrod RobelLv2
28 Sep 2019

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McGuire Corporation began operations in 2018. The company purchases computer equipment from manufacturers and then sells to retail stores. During 2018, the bookkeeper used a check register to record all cash receipts and cash disbursements. No other journals were used. The following is a recap of the cash receipts and disbursements made during the year.

Cash receipts:
Sale of common stock $ 50,000
Collections from customers 320,000
Borrowed from local bank on April 1, note signed requiring
principal and interest at 12% to be paid on March 31, 2019 40,000
Total cash receipts $ 410,000
Cash disbursements:
Purchase of merchandise $ 220,000
Payment of salaries and wages 80,000
Purchase of office equipment 30,000
Payment of rent on building 14,000
Miscellaneous expenses 10,000
Total cash disbursements $ 354,000


You are called in to prepare financial statements at December 31, 2018. The following additional information was provided to you:

Customers owed the company $22,000 at year-end.

At year-end, $30,000 was still due to suppliers of merchandise purchased on credit.

At year-end, merchandise inventory costing $50,000 still remained on hand.

Salaries and wages owed to employees at year-end amounted to $5,000.

On December 1, $3,000 in rent was paid to the owner of the building used by McGuire. This represented rent for the months of December through February.

The office equipment, which has a 10-year life and no salvage value, was purchased on January 1, 2018. Straight-line depreciation is used.


Required:

Prepare the income statement for 2018 and a balance sheet as of December 31, 2018.

Madeleine Bohne, president of the retailer Bohne Products, hasjust approached the company's bank with a request for a $34,000,90-day loan. The purpose of the loan is to assist the company inacquiring inventories in support of peak April sales. Because thecompany has had some difficulty in paying off its loans in thepast, the loan officer has asked for a cash budget to helpdetermine whether the loan should be made. The following data areavailable for the months April–June, during which the loan will beused:

a.

On April 1, the start of the loan period, the cash balance willbe $29,000. Accounts receivable on April 1 will total $135,000, ofwhich $127,500 will be collected during April and $5,000 will becollected during May. The remainder will be uncollectible.

b.

Past experience shows that 19% of a month's sales are collectedin the month of sale, 74% in the month following sale, and 4% inthe second month following sale. The other 3% represents bad debtsthat are never collected. Budgeted sales and expenses for thethree-month period follow:

April May June
Sales (all on account) $ 206,000 $316,000 $ 346,000
Merchandise purchases $ 119,500 $169,500 $ 149,500
Payroll $ 9,000 $ 9,000 $ 8,000
Lease payments $ 13,300 $13,300 $ 13,300
Advertising $ 71,500 $ 74,200 $ 57,200
Equipment purchases $ 8,600 − −
Depreciation $ 9,600 $ 9,600 $ 9,600

c.

Merchandise purchases are paid in full during the monthfollowing purchase. Accounts payable for merchandise purchases onMarch 31, which will be paid during April, total $108,200.

d.

In preparing the cash budget, assume that the $34,000 loan willbe made in April and repaid in June. Interest on the loan willtotal $820.

Required:

1.

Prepare a schedule of expected cash collections for April, May,and June and for the three months in total. (Leave no cells blank -be certain to enter "0" wherever required.)

Schedule of Expected Cash Collections
April May June Quarter -Total
From accounts receivable $ $ $ $
From April sales
From May sales
From June sales

Total cash collections $ $ $ $

2.

Prepare a cash budget, by month and in total, for thethree-month period. Assume that expenses are paid in the monthincurred. (Input all amounts as positive values except cashdeficiency, repayments and interest which should be indicated by aminus sign. Leave no cells blank - be certain to enter "0" whereverrequired. Total Financing should be indicated with a minus signwhen the company is repaying amounts that were previouslyborrowed.)

Bohne Products
Cash Budget
April May June Quarter - Total
Cash balance, beginning $ $ $ $
Add receipts:
Collections from customers

Total available

Less disbursements:
Merchandise purchases
Payroll
Lease payments
Advertising
Equipment purchases

Total disbursements

Excess (deficiency) of receipts
over disbursements

Financing:
Borrowings
Repayments
Interest

Total financing

Cash balance, ending $ $ $ $

ABC Company, an office supplies specialty store, prepares its master budget on a quarterly basis.
The following data have been assembled to assist in preparing the master budget for the first quarter.
a. As of December 31 (the end of the prior quarter), the company's general ledger showed the following account balances:
Debits Credits
Cash $48,000
Accounts receivable 195,000
Inventory 45,600
Buildings and equipment (net) 350,000
Acccounts payable $79,800
Common stock 450,000
Retained earnings 108,800
$638,600 $638,600
b. Actual sales for December and budgeted sales for the next four months are as follows:
December (actual) January February March April
$260,000 $380,000 $410,000 $280,000 $210,000
c. Sales are collected as follows:
25% collected in cash at the time of the sale
75% on credit and collected in the month following sale
The accounts receivable at December 31 are a result of December credit sales.
d. The company's gross margin as a percent of sales is 40%
In other words, cost of goods sold is 60% of sales.
e. Monthly expenses are budgeted as follows:
Salaries and wages $35,000 per month
Advertising $50,000 per month
Shipping 4% of sales
Other expenses 3% of sales
Depreciation, including depreciation on new assets acquired during the quarter,
will be $42,000 for the quarter.
All selling and administrative expenses, except depreciation, are paid in cash in the month they are incurred.
f. Each month's ending inventory should equal
20% of the following month's cost of goods sold
g. Inventory purchases are paid for as follows:
50% in the month of the purchase
with the remaining balance paid in the following month.
h. During February, the company will purchase a new copy machine for
$2,100 cash.
During March, the company will purchase other equipment for
$76,000 cash.
i. Cash dividends paid in January will be $35,000
j. Management wants to maintain a current cash balance of $20,000
The company has an agreement with the local bank that allows the company to
borrow in increments of $1,000 at the beginning of the month.
The monthly interest rate on the loan is 1%
For simplicity, assume that the interest is not compounded.
The company would, as far as it is able, repay the loan plus any accumulated interest at the end of the quarter.
Required: Using the data above, complete the following statements and schedules for the first quarter using the formats given below.
To receive full credit, all amounts below must be entered as formulas or cell references, except for the financing section of the cash budget.
Submissions using formulas or cell references for the financing section may receive up to 3 points extra credit,
dependent upon the degree to which the formulas can be used for any and all possible scenarios. (Hint: IF statements.)
1. Schedule of expected cash collections January February March Quarter
Cash sales
Credit sales check figure:
Total cash collections Total cash collections =
$1,055,000
2a. Merchandise purchases budget January February March Quarter
Budgeted cost of goods sold
Desired ending inventory
Total needs
Beginning inventory
Required purchases
2b. Schedule of expected cash disbursements for merchandise purchases
January February March Quarter
December purchases
January purchases check figure:
February purchases Total cash disbursements
March purchases for purchases =
Total cash disbursements for purchases $621,600
3. Cash budget January February March Quarter
Beginning cash balance
Cash collections
Total cash available
Cash disbursements:
Inventory purchases
Selling & admin. expenses
Equipment purchases
Cash dividends
Total cash disbursements
Excess (deficiency) of cash
Financing:
Borrowing
Repayment of principal
Interest
Total financing check figure:
Ending cash balance Mar. 31 cash balance =
$37,650
4. Prepare an absorption costing income statement for the quarter ended March 31 in the space below.
check figure:
Net income =
$55,350
5. Prepare a balance sheet as of March 31 in the space below.
check figure:
A = L + SE =
$658,950

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