Chapter 15 - Bu. Controllin

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    Budgeting as aTool for Planningand Controlling

    Chapter

    15100 Shares

    $1 par value

    Budget????

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    Learning Objectives

    Describe the importanceand benefits ofbudgeting.

    Explain the process ofbudget administration.

    Describe a masterbudget and the process

    of preparing it.

    Prepare eachcomponent of a masterbudget and link each to

    the budgeting process. Link both operating and

    capital expendituresbudgets to budgeted

    financial statements.

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    Budget Goals: Avoid

    Setting budget goalstoo tightly.

    Setting budget goals

    too loosely. Setting conflicting

    budget goals.

    Purposes and Goals of Budgeting

    Purposes of Budgeting

    Establishing specificfuture goals.

    Executing plans to

    achieve the goals.Comparing actualresults to the goals.

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    Budgeting is the process of planning futurebusiness actions and expressing them asformal plans.

    Budget is a formal statement of a companysfuture plans.

    The role of accounting during the budgetingprocess is to:(a) provide historical data on revenues, costs,

    and expenses,(b) express managements plans in financial terms

    and(c) prepare periodic budget reports.

    Nature of Budgeting

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    Nature of Budgeting

    Requires all management plan ahead. Provides definite objectives for evaluating

    performance.

    Creates an early warning system for potentialproblems. Facilitates the coordination of activities within

    the business. Results in greater management awareness

    of the entitys overall operations. Motivates personnel throughout the

    organization to meet planned objectives

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    Advantages

    Communicates plans

    and instructions

    Promotes analysis and

    a focus on the future

    Motivates employees

    Provides a basis forevaluating performance against

    past or expected results

    Coordinatesbusiness activities

    Defines goalsand objectives

    Budget Process

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    Budgeting is a detailed activity that requiresadministration.

    3 aspects that are important:1. Budget Committee

    2. Budget Reporting

    3. Budget Period

    Budget Adminstration

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    Provides central guidance toensure that individual

    budgets submitted from alldepartments are realistic andcoordinated.

    Budget Committee

    Consists of managers from all departmentsof the organization.

    Oversees the budget preparation.

    Communication between originatingdepartment and budget committee.

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    Flow of Budget Data is abottom-upprocess.

    Supervisor Supervisor

    MiddleManagement

    Supervisor Supervisor

    MiddleManagement

    Top Management

    Budget Committee

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    Budget Reporting

    Budget period coincides with the accountingperiod.

    Budget period pertains to the time period for

    which the budget is prepared such as a year ormonth.

    Annual budget usually separated into quarterlyor monthly to allow management evaluate

    performance and take action. Managers compare actual results with

    budgeted to identify variance.

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    2005 2006 2007 2008

    Operating Budget

    The annual operating budgetmay be divided into quarterlyor monthly budgets.

    Budget Timing

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    Continuous orRolling Budget

    The budget may be a twelve-month

    budget that rolls forward one monthas the current month is completed.

    2005 2006 2007 2008

    Budget Timing

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    Master Budget

    A master budget is a formal overall plan for acompany consist of plans for businessoperations, capital expenditure and financialresults.

    Several individual budgets are linked with eachother and consists of 3 types budgeting:

    Operating budgets show the individualbudgets that result in the preparation of the

    budgeted income statement. Capital expenditure budgetis a plannedcapital expenditure for fixed assets.

    Financial Budgetfocus primarily on the cash

    resources needed to fund expected operations

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    Financial Budgets

    Cash Budget Budgeted Income Statement Budgeted Balance Sheet

    Master Budget Components

    Operating Budgets

    Sales Budget Merchandise Purchase

    Budget (for Merchandiser) Production Budget &

    Manufacturing Budget (for

    Manufacturer) Selling Expense Budget General and Administrative

    Budget

    Capital ExpendituresBudget

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    Master Budget Sequence

    PrepareSales

    budget

    PrepareMerchandise

    Purchases and/orProduction and

    ManufacturingBudget.

    Prepare financialbudgets:cash

    incomestatement

    balance sheet

    Preparecapital

    expenditurebudget

    Prepareselling,

    general andadministrative

    budgets

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    SalesBudget

    EstimatedUnit Sales

    EstimatedUnit Price

    Analysis of economic and market conditions+

    Forecasts of customer needs from marketing personnel

    Sales Budget

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    Sales Budget

    The sales budget is the first budget prepared.

    Each of the other budgets depends on the sales

    budget. It is derived from the sales forecast. It represents managements bestestimateof sales

    revenue for the budget period.

    Sales = Budgeted x Unit

    Budget Unit Sales Price

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    Sales Budget

    Sales budget alwaysfollowed by BudgetedCash Receiptsor Cash

    Receipts Schedule.

    Preparing a CashReceipts Schedule from

    customers is useful inpreparing a cash budget.

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    In September 2006, Hockey Den sold 700hockey sticks at $100 each. Hockey Denprepared the following sales budget for the next

    four months:

    Sales Budget - Illustration

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    Sales Budget

    HOCKEY DEN

    MONTHLY SALES BUDGET

    OCTOBER 2006 JANUARY 2007

    Budgeted Budgeted BudgetedUnit Sales Unit Price Total Sales

    September 2006 (actual) 700 100$ 70,000$

    October 2006 1,000 100$ 100,000$

    November 2006 800 100 80,000December 2006 1,400 100 140,000

    Total 3,200 100$ 320,000$

    January 2007 900 100$ 90,000$

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    Merchandise Purchases Budget

    It is prepared based on sales budget. It estimates the quantity of merchandises

    needed in order to fulfill the estimated sales.

    It also depends on the estimated beginninginventory and the desired ending inventory asa preparation for the following sales.

    Inventoryto be

    purchased

    =Budgetedending

    inventory

    +Budgeted

    cost of salesfor the period

    Budgetedbeginninginventory

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    Merchandise Purchases Budget

    Purchase budget alwaysfollowed by BudgetedCash Disbursementsfor

    Purchases or CashDisbursement Schedule.

    Preparing a CashDisbursements Scheduleto suppliers is useful inpreparing a cash budget.

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    The quantity purchased is affected by:

    Just-in-time inventory systemsthat enablepurchases of smaller, frequently delivered

    quantities.

    Safety stock inventory systemsthat provideprotection against lost sales caused by

    delays in supplier shipments.

    Merchandise Purchases Budget

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    Merchandise Purchases Budget -Illustration

    Hockey Den buys hockey sticks for $60.00 eachand maintains an ending inventory equal to 90percent of the next months budgeted sales. 900hockey sticks are on hand on September 30.

    Lets prepare the purchases budget for Hockey Den.

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    Merchandise Purchases Budget

    HOCKEY DEN

    MERCHANDISE PURCHASE BUDGET

    OCTOBER 2006 DECEMBER 2006

    October November December

    Nextmonth's unit sales 800 1,400 900Ending inventory percentage 90% 90% 90%

    Budgeted ending inventory units 720 1,260 810

    Add:current month's unit sales

    Total units needed

    Less: beginning inventory units

    Number of units to be purchased

    Budgeted cost per unitBudgeted cost of purchases

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    Merchandise Purchases Budget

    HOCKEY DEN

    MERCHANDISE PURCHASES BUDGET

    OCTOBER 2006 DECEMBER 2006

    October November December

    Nextmonth's unit sales 800 1,400 900Ending inventory percentage 90% 90% 90%

    Budgeted ending inventory units 720 1,260 810

    Add current month's unit sales 1,000 800 1,400

    Total units needed 1,720 2,060 2,210

    Less: beginning inventory units

    Number of units to be purchased

    Budgeted cost per unitBudgeted cost of purchases

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    Merchandise Purchases Budget

    HOCKEY DEN

    MERCHANDISE PURCHASES BUDGET

    OCTOBER 2006 DECEMBER 2006

    October November December

    Nextmonth's unit sales 800 1,400 900Ending inventory percentage 90% 90% 90%

    Budgeted ending inventory units 720 1,260 810

    Add current month's unit sales 1,000 800 1,400

    Total units needed 1,720 2,060 2,210

    Less: beginning inventory units (900)

    Number of units to be purchased 820

    Budgeted cost per unit $ 60Budgeted cost of purchases 49,200$

    Beginning inventory is last month's ending inventory.

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    Merchandise Purchases Budget

    HOCKEY DEN

    MERCHANDISE PURCHASES BUDGET

    OCTOBER 2006 DECEMBER 2006

    October November December

    Nextmonth's unit sales 800 1,400 900Ending inventory percentage 90% 90% 90%

    Budgeted ending inventory units 720 1,260 810

    Add current month's unit sales 1,000 800 1,400

    Total units needed 1,720 2,060 2,210

    Less: beginning inventory units (900) (720) (1,260)

    Number of units to be purchased 820 1,340 950

    Budgeted cost per unit $ 60 $ 60 $ 60Budgeted cost of purchases 49,200$ 80,400$ 57,000$

    Beginning inventory is last month's ending inventory.

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    Lets prepare the selling expense budget for Hockey Den.

    Hockey Den pays salescommissions equal to 10percent of total sales.

    Hockey Den pays amonthly salary of $2,000to its sales manager.

    Selling Expense Budget - Illustration

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    From Hockey Dens sales budget

    Selling Expense Budget

    HOCKEY DEN

    SELLING EXPENSE BUDGET

    OCTOBER 2006

    DECEMBER 2006

    October November December Total

    Budgeted sales 100,000$ 80,000$ 140,000$ 320,000$

    Sales commission % 10% 10% 10% 10%

    Sales commission 10,000$ 8,000$ 14,000$ 32,000$

    Sales manager salary 2,000 2,000 2,000 6,000Total selling expenses 12,000$ 10,000$ 16,000$ 38,000$

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    Lets prepare the general and administrative

    expense budget for Hockey Den.

    General andadministrative salaries are$4,500 per month.

    Depreciation of equipmentis $1,500 per month.

    General and Administrative ExpenseBudget - Illustration

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    General and Administrative ExpenseBudget

    HOCKEY DEN

    GENERAL AND ADMINISTRATIVE EXPENSE BUDGET

    OCTOBER 2006

    DECEMBER 2006

    October November December Total

    Administrative salaries 4,500$ 4,500$ 4,500$ 13,500$

    Equipment depreciation 1,500 1,500 1,500 4,500

    Total 6,000$ 6,000$ 6,000$ 18,000$

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    Operating Budgets : Merchandiser

    SalesBudget

    Schedule

    Cash DisbursementsSchedule

    Cash Receipts Schedule

    Merchandise PurchaseBudget

    Selling, General andAdministrative

    Expenses Budget

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    Operating Budgets : Manufacturer

    SalesBudget

    Schedule

    Cash DisbursementsSchedule

    Cash Receipts Schedule

    ProductionBudget

    Manufacturing Budget :Direct Materials, Direct labor,

    Factory Overhead

    Selling, General andAdministrative

    Expenses Budget

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    CashBudget

    ExpectedReceipts

    andDisbursements

    BudgetedIncome

    Statement

    BudgetedBalanceSheet

    Financial Budgets

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    Cash Receipts Schedule - Illustration

    Forty percent of HockeyDens sales are for cash.

    The remaining sixty percentare credit sales that arecollected in full in the monthfollowing sale.

    Lets prepare the cash receipts budget for Hockey Den.

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    HOCKEY DEN

    CASH RECEIPTS SCHEDULE

    OCTOBER 2006 DECEMBER 2006

    September October November DecemberBudgeted sales 70,000$ 100,000$ 80,000$ 140,000$

    Accounts receivable

    Cash receipts from:

    Cash sales

    Collection of receivables

    Total cash receipts

    60 percent of September sales are collected in October

    From Hockey Dens sales budget

    Cash Receipts Schedule

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    HOCKEY DEN

    CASH RECEIPTS SCHEDULE

    OCTOBER 2006 DECEMBER 2006

    September October November DecemberBudgeted sales 70,000$ 100,000$ 80,000$ 140,000$

    Accounts receivable 42,000$ 60,000$ 48,000$ 84,000$

    Cash receipts from:

    Cash sales 40,000$ 32,000$ 56,000$

    Collection of receivables

    Total cash receipts

    40% of sales

    60% of sales

    Cash Receipts Schedule

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    HOCKEY DEN

    CASH RECEIPTS SCHEDULE

    OCTOBER 2006 DECEMBER 2006

    September October November DecemberBudgeted sales 70,000$ 100,000$ 80,000$ 140,000$

    Accounts receivable 42,000$ 60,000$ 48,000$ 84,000$

    Cash receipts from:

    Cash sales 40,000$ 32,000$ 56,000$

    Collection of receivables 42,000 60,000 48,000

    Total cash receipts 82,000$ 92,000$ 104,000$

    Cash Receipts Schedule

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    Hockey Dens purchases ofmerchandise are entirely onaccount.

    Full payment is made in themonth following purchase.

    The 30 September balance

    of Accounts Payable is$58,200.

    Lets look at cash disbursementsfor purchases for Hockey Den.

    Cash Disbursements Schedule -Illustration

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    HOCKEY DEN

    CASH DISBURSEMENTS SCHEDULE

    OCTOBER 2006 - DECEMBER 2006

    October payments (30 September balance) 58,200$

    November payments (October purchases) 49,200

    December payments (November purchases) 80,400

    From merchandise purchases budget

    Cash Disbursements Schedule

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    Hockey Den:will pay a cash dividend of $3,000 in November.

    will purchase $25,000 of equipment in

    December.has an income tax liability of $20,000 from the

    previous quarter that will be paid in October.

    has a 30 September cash balance of $20,000.

    has an agreement with its bank for loans at the

    end of each month to enable a minimum cash

    balance of $20,000.

    Cash Budget - Illustration

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    Hockey Den:pays interest equal to one percent of the prior

    months ending loan balance.

    repays loans when the ending cash balanceexceeds $20,000.

    owes $10,000 on this loan arrangement on

    September 30.has 40 percent income tax rate.

    will pay taxes for current quarter next year.

    Lets prepare the cash budget for Hockey Den.

    Cash Budget

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    HOCKEY DEN

    CASH BUDGET

    OCTOBER 2006 - DECEMBER 2006

    October November December

    Beginning cash balance 20,000$

    Receipts from customers 82,000 92,000 104,000

    Total cash available 102,000$

    Disbursements

    Payments for merchandise

    Sales commissions

    Sales salaries

    Administrative salaries

    Income taxes

    DividendsInterest

    Equipment purchase

    Total disbursements

    Preliminary balance

    From Cash Receipts Schedule

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    HOCKEY DEN

    CASH BUDGET

    OCTOBER 2006 - DECEMBER 2006

    October November December

    Beginning cash balance 20,000$

    Receipts from customers 82,000 92,000 104,000

    Total cash available 102,000$

    Disbursements

    Payments for merchandise 58,200$ 49,200$ 80,400$

    Sales commissions

    Sales salaries

    Administrative salaries

    Income taxes

    DividendsInterest

    Equipment purchase

    Total disbursements

    Preliminary balance

    From Cash DisbursementsSchedule

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    HOCKEY DEN

    CASH BUDGET

    OCTOBER 2006 - DECEMBER 2006

    October November December

    Beginning cash balance 20,000$

    Receipts from customers 82,000 92,000 104,000

    Total cash available 102,000$

    Disbursements

    Payments for merchandise 58,200$ 49,200$ 80,400$

    Sales commissions 10,000 8,000 14,000

    Sales salaries 2,000 2,000 2,000

    Administrative salaries

    Income taxes

    DividendsInterest

    Equipment purchase

    Total disbursements

    Preliminary balance

    From Selling Expense Budget

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    HOCKEY DEN

    CASH BUDGET

    OCTOBER 2006 - DECEMBER 2006

    October November December

    Beginning cash balance 20,000$

    Receipts from customers 82,000 92,000 104,000

    Total cash available 102,000$

    Disbursements

    Payments for merchandise 58,200$ 49,200$ 80,400$

    Sales commissions 10,000 8,000 14,000

    Sales salaries 2,000 2,000 2,000

    Administrative salaries 4,500 4,500 4,500

    Income taxes

    DividendsInterest

    Equipment purchase

    Total disbursements

    Preliminary balance

    From General andAdministrative Expense Budget

    Depreciation is anon-cash expense.

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    HOCKEY DEN

    CASH BUDGET

    OCTOBER 2006 - DECEMBER 2006

    October November December

    Beginning cash balance 20,000$

    Receipts from customers 82,000 92,000 104,000

    Total cash available 102,000$

    Disbursements

    Payments for merchandise 58,200$ 49,200$ 80,400$

    Sales commissions 10,000 8,000 14,000

    Sales salaries 2,000 2,000 2,000

    Administrative salaries 4,500 4,500 4,500

    Income taxes 20,000

    DividendsInterest 100

    Equipment purchase

    Total disbursements 94,800$

    Preliminary balance 7,200$

    0.01 $10,000

    Because Hockey Denmaintains a minimum

    cash balance of $20,000,the company mustborrow $12,800.

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    HOCKEY DEN

    CASH BUDGET

    OCTOBER 2006 - DECEMBER 2006

    October November December

    Preliminary balance 7,200$

    Additional borrowing 12,800

    Loan repayment

    Ending cash balance 20,000$

    Ending loan balance 22,800$

    Ending cash balance for Octoberis the beginning November balance.

    Cash Budget Continued

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    HOCKEY DEN

    CASH BUDGET

    OCTOBER 2006 - DECEMBER 2006

    October November December

    Beginning cash balance 20,000$ 20,000$

    Receipts from customers 82,000 92,000 104,000

    Total cash available 102,000$ 112,000$

    Disbursements

    Payments for merchandise 58,200$ 49,200$ 80,400$

    Sales commissions 10,000 8,000 14,000

    Sales salaries 2,000 2,000 2,000

    Administrative salaries 4,500 4,500 4,500

    Income taxes 20,000

    Dividends 3,000Interest 100 228

    Equipment purchase

    Total disbursements 94,800$ 66,928$

    Preliminary balance 7,200$ 45,072$

    0.01 $22,800

    Cash balanceis sufficientto repay the

    $22,800 loan.

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    HOCKEY DEN

    CASH BUDGET

    OCTOBER 2006 - DECEMBER 2006

    October November December

    Preliminary balance 7,200$ 45,072$

    Additional borrowing 12,800

    Loan repayment (22,800)

    Ending cash balance 20,000$ 22,272$

    Ending loan balance 22,800$ $ 0

    Ending cash balance for Novemberis the beginning December balance.

    Cash Budget Continued

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    HOCKEY DEN

    CASH BUDGET

    OCTOBER 2006 - DECEMBER 2006

    October November December

    Beginning cash balance 20,000$ 20,000$ 22,272$

    Receipts from customers 82,000 92,000 104,000

    Total cash available 102,000$ 112,000$ 126,272$

    Disbursements

    Payments for merchandise 58,200$ 49,200$ 80,400$

    Sales commissions 10,000 8,000 14,000

    Sales salaries 2,000 2,000 2,000

    Administrative salaries 4,500 4,500 4,500

    Income taxes 20,000

    Dividends 3,000Interest 100 228

    Equipment purchase 25,000

    Total disbursements 94,800$ 66,928$ 125,900$

    Preliminary balance 7,200$ 45,072$ 372$

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    HOCKEY DEN

    CASH BUDGET

    OCTOBER 2006 - DECEMBER 2006

    October November December

    Preliminary balance 7,200$ 45,072$ 372$

    Additional borrowing 12,800 19,628

    Loan repayment (22,800)

    Ending cash balance 20,000$ 22,272$ 20,000$Ending loan balance 22,800$ $ 0 19,628$

    Cash Budget Continued

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    Lets prepare the budgeted incomestatement for Hockey Den.

    CashBudget

    BudgetedIncome

    Statement

    Budgeted Income Statement

    From the Sales Budget

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    HOCKEY DEN

    BUDGETED INCOME STATEMENT

    FOR THE THREE MONTHS ENDED 31 DECEMBER 2006

    Sales (3,200 units @ $100) 320,000$

    Cost sales (3,200 units @ $60) 192,000

    Gross profit 128,000$

    Operating expensesSales commissions (32,000)$

    Sales salaries (6,000)

    Administrative salaries (13,500)

    Equipment depreciation (4,500)

    Interest expense (328)

    Profit before taxes 71,672$

    Income tax expense (28,669)

    Profit for the period 43,003$

    g

    From the Merchandise

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    HOCKEY DEN

    BUDGETED INCOME STATEMENTFOR THE THREE MONTHS ENDED 31 DECEMBER 2006

    Sales (3,200 units @ $100) 320,000$

    Cost of sales (3,200 units @ $60) 192,000

    Gross profit 128,000$

    Operating expenses

    Sales commissions (32,000)$

    Sales salaries (6,000)

    Administrative salaries (13,500)

    Equipment depreciation (4,500)Interest expense (328)

    Profit before taxes 71,672$

    Income tax expense (28,669)

    Profit for the period 43,003$

    Purchases Budget

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    HOCKEY DEN

    BUDGETED INCOME STATEMENT

    FOR THE THREE MONTHS ENDED 31 DECEMBER 2006

    Sales (3,200 units @ $100) 320,000$

    Cost of sales (3,200 units @ $60) 192,000

    Gross profit 128,000$

    Operating expenses

    Sales commissions (32,000)$Sales salaries (6,000)

    Administrative salaries (13,500)

    Equipment depreciation (4,500)

    Interest expense (328)Profit before taxes 71,672$

    Income tax expense (28,669)

    Profit for the period 43,003$From the SellingExpense Budget

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    HOCKEY DEN

    BUDGETED INCOME STATEMENTFOR THE THREE MONTHS ENDED 31 DECEMBER 2006

    Sales (3,200 units @ $100) 320,000$

    Cost of sales (3,200 units @ $60) 192,000

    Gross profit 128,000$

    Operating expenses

    Sales commissions (32,000)$

    Sales salaries (6,000)

    Administrative salaries (13,500)

    Equipment depreciation (4,500)Interest expense 328

    Profit before taxes 71,672$

    Income tax expense (28,669)

    Profit for the period 43,003$

    From the General and AdministrativeExpense Budget

    Depreciation is a non-cash expense.

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    HOCKEY DEN

    BUDGETED INCOME STATEMENTFOR THE THREE MONTHS ENDED 31 DECEMBER 2006

    Sales (3,200 units @ $100) 320,000$

    Cost of sales (3,200 units @ $60) 192,000

    Gross profit 128,000$

    Operating expenses

    Sales commissions (32,000)$

    Sales salaries (6,000)

    Administrative salaries (13,500)

    Equipment depreciation (4,500)Interest expense 328

    Profit before taxes 71,672$

    Income tax expense (28,669)

    Profit for the period 43,003$From the Cash Budget

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    HOCKEY DEN

    BUDGETED INCOME STATEMENTFOR THE THREE MONTHS ENDED 31 DECEMBER 2006

    Sales (3,200 units @ $100) 320,000$

    Cost of sales (3,200 units @ $60) 192,000

    Gross profit 128,000$

    Operating expenses

    Sales commissions (32,000)$

    Sales salaries (6,000)

    Administrative salaries (13,500)

    Equipment depreciation (4,500)Interest expense (328) 56,328

    Profit before taxes 71,672$

    Income tax expense (28,669)

    Profit for the period 43,003$$71,672 0.40

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    Lets prepare the budgeted balancesheet for Hockey Den.

    BudgetedBalance

    Sheet

    BudgetedIncome

    Statement

    Budgeted Balance Sheet

    P i B d t d

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    Hockey Den reports the following accountbalances on 30 September prior topreparing its budgeted financial statements:

    Equipment $200,000

    Accumulated depreciation $ 36,000

    Common stock $150,000

    Retained earnings $ 41,800

    Lets prepare the budgeted balancesheet for Hockey Den.

    Preparing a BudgetedBalance Sheet

    HOCKEY DENBUDGETED BALANCE SHEET

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    AS AT 31 DECEMBER 2006

    ASSETS

    Non Current Assets

    Equipment $225,000

    Accumulated depreciation - Equipment (40,500) $184,500

    Total non current assets $184,500

    Current Assets

    Cash $20,000

    Accounts receivable 84,000

    Inventory 48,600

    Total current assets $152,600

    Total Assets $337,100EQUITY AND LIABILITIES

    Equity

    Common shares $150,000

    Retained earnings 81,803 $231,803

    Total Equity $231,803

    Non Current Liabilities

    Bank loan payable $19,628 $19,628

    Total non current liabilities $19,628

    Current Liabilities

    Accounts payable $57,000

    Income taxes payable 28,669

    Total current liabilities $85,669

    Total Liabilities $105,297

    Total Equity and Liabilities $337,100

    HOCKEY DENBUDGETED BALANCE SHEET

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    AS AT 31 DECEMBER 2006

    ASSETS

    Non Current Assets

    Equipment $225,000

    Accumulated depreciation - Equipment (40,500) $184,500

    Total non current assets $184,500

    Current Assets

    Cash $20,000

    Accounts receivable 84,000

    Inventory 48,600

    Total current assets $152,600

    Total Assets $337,100

    EQUITY AND LIABILITIES

    Equity

    Common shares $150,000

    Retained earnings 81,803 $231,803

    Total Equity $231,803

    Non Current Liabilities

    Bank loan payable $19,628 $19,628

    Total non current liabilities $19,628

    Current Liabilities

    Accounts payable $57,000

    Income taxes payable 28,669

    Total current liabilities $85,669

    Total Liabilities $105,297

    Total Equity and Liabilities $337,100

    From the Cash Budget

    HOCKEY DENBUDGETED BALANCE SHEET

    AS AT 31 DECEMBER 2006

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    AS AT 31 DECEMBER 2006

    ASSETS

    Non Current Assets

    Equipment $225,000

    Accumulated depreciation - Equipment (40,500) $184,500

    Total non current assets $184,500

    Current Assets

    Cash $20,000

    Accounts receivable 84,000

    Inventory 48,600

    Total current assets $152,600

    Total Assets $337,100

    EQUITY AND LIABILITIES

    Equity

    Common shares $150,000

    Retained earnings 81,803 $231,803

    Total Equity $231,803

    Non Current Liabilities

    Bank loan payable $19,628 $19,628

    Total non current liabilities $19,628

    Current Liabilities

    Accounts payable $57,000

    Income taxes payable 28,669

    Total current liabilities $85,669

    Total Liabilities $105,297

    Total Equity and Liabilities $337,100

    From the Cash ReceiptsSchedule

    HOCKEY DENBUDGETED BALANCE SHEET

    AS AT 31 DECEMBER 2006

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    AS AT 31 DECEMBER 2006

    ASSETS

    Non Current Assets

    Equipment $225,000

    Accumulated depreciation - Equipment (40,500) $184,500

    Total non current assets $184,500

    Current Assets

    Cash $20,000

    Accounts receivable 84,000

    Inventory 48,600

    Total current assets $152,600

    Total Assets $337,100

    EQUITY AND LIABILITIES

    Equity

    Common shares $150,000

    Retained earnings 81,803 $231,803

    Total Equity $231,803

    Non Current Liabilities

    Bank loan payable $19,628 $19,628

    Total non current liabilities $19,628

    Current Liabilities

    Accounts payable $57,000

    Income taxes payable 28,669

    Total current liabilities $85,669

    Total Liabilities $105,297

    Total Equity and Liabilities $337,100

    From the Merchandise Purchases Budget8,100 units @ $6

    HOCKEY DENBUDGETED BALANCE SHEET

    AS AT 31 DECEMBER 2006

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    AS AT 31 DECEMBER 2006

    ASSETS

    Non Current Assets

    Equipment $225,000

    Accumulated depreciation - Equipment (40,500) $184,500

    Total non current assets $184,500

    Current Assets

    Cash $20,000

    Accounts receivable 84,000

    Inventory 48,600

    Total current assets $152,600

    Total Assets $337,100

    EQUITY AND LIABILITIES

    Equity

    Common shares $150,000

    Retained earnings 81,803 $231,803

    Total Equity $231,803

    Non Current Liabilities

    Bank loan payable $19,628 $19,628

    Total non current liabilities $19,628

    Current Liabilities

    Accounts payable $57,000

    Income taxes payable 28,669

    Total current liabilities $85,669

    Total Liabilities $105,297

    Total Equity and Liabilities $337,100

    $200,000 30 September balance plus the$25,000 December acquisition

    HOCKEY DENBUDGETED BALANCE SHEET

    AS AT 31 DECEMBER 2006

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    AS AT 31 DECEMBER 2006

    ASSETS

    Non Current Assets

    Equipment $225,000

    Accumulated depreciation - Equipment (40,500) $184,500

    Total non current assets $184,500

    Current Assets

    Cash $20,000

    Accounts receivable 84,000

    Inventory 48,600

    Total current assets $152,600

    Total Assets $337,100

    EQUITY AND LIABILITIES

    Equity

    Common shares $150,000

    Retained earnings 81,803 $231,803

    Total Equity $231,803

    Non Current Liabilities

    Bank loan payable $19,628 $19,628

    Total non current liabilities $19,628

    Current Liabilities

    Accounts payable $57,000

    Income taxes payable 28,669

    Total current liabilities $85,669

    Total Liabilities $105,297

    Total Equity and Liabilities $337,100

    $36,000 30 September balance plus the $4,500from the General and

    Administrative Expense Budget

    HOCKEY DENBUDGETED BALANCE SHEET

    AS AT 31 DECEMBER 2006

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    $105,297Total Liabilities

    $85,669Total current liabilities

    $19,628$19,628Bank loan payable

    $19,628Total non current liabilities

    Current Liabilities

    $57,000Accounts payable

    $337,100Total Equity and Liabilities

    28,669Income taxes payable

    Non Current Liabilities

    $231,803Total Equity

    $231,80381,803Retained earnings

    $150,000Common shares

    Equity

    EQUITY AND LIABILITIES

    $337,100Total Assets

    $152,600Total current assets

    48,600Inventory

    84,000Accounts receivable

    $20,000Cash

    Current Assets

    $184,500Total non current assets

    $184,500(40,500)Accumulated depreciation - Equipment

    $225,000Equipment

    Non Current Assets

    ASSETS

    AS AT 31 DECEMBER 2006

    From the MerchandisePurchases Budget

    HOCKEY DENBUDGETED BALANCE SHEET

    AS AT 31 DECEMBER 2006

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    AS AT 31 DECEMBER 2006

    ASSETS

    Non Current Assets

    Equipment $225,000

    Accumulated depreciation - Equipment (40,500) $184,500

    Total non current assets $184,500

    Current Assets

    Cash $20,000

    Accounts receivable 84,000

    Inventory 48,600

    Total current assets $152,600

    Total Assets $337,100

    EQUITY AND LIABILITIES

    Equity

    Common shares $150,000

    Retained earnings 81,803 $231,803

    Total Equity $231,803

    Non Current Liabilities

    Bank loan payable $19,628 $19,628

    Total non current liabilities $19,628

    Current Liabilities

    Accounts payable $57,000

    Income taxes payable 28,669

    Total current liabilities $85,669

    Total Liabilities $105,297

    Total Equity and Liabilities $337,100

    From the BudgetedIncome Statement

    HOCKEY DENBUDGETED BALANCE SHEET

    AS AT 31 DECEMBER 2006

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    AS AT 31 DECEMBER 2006

    ASSETS

    Non Current Assets

    Equipment $225,000

    Accumulated depreciation - Equipment (40,500) $184,500

    Total non current assets $184,500

    Current Assets

    Cash $20,000

    Accounts receivable 84,000

    Inventory 48,600

    Total current assets $152,600

    Total Assets $337,100

    EQUITY AND LIABILITIES

    Equity

    Common shares $150,000

    Retained earnings 81,803 $231,803

    Total Equity $231,803

    Non Current Liabilities

    Bank loan payable $19,628 $19,628

    Total non current liabilities $19,628

    Current Liabilities

    Accounts payable $57,000

    Income taxes payable 28,669

    Total current liabilities $85,669

    Total Liabilities $105,297

    Total Equity and Liabilities $337,100

    From the Cash Budget

    HOCKEY DENBUDGETED BALANCE SHEET

    AS AT 31 DECEMBER 2006

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    AS AT 31 DECEMBER 2006

    ASSETS

    Non Current Assets

    Equipment $225,000

    Accumulated depreciation - Equipment (40,500) $184,500

    Total non current assets $184,500

    Current Assets

    Cash $20,000

    Accounts receivable 84,000

    Inventory 48,600

    Total current assets $152,600

    Total Assets $337,100

    EQUITY AND LIABILITIES

    Equity

    Common shares $150,000

    Retained earnings 81,803 $231,803

    Total Equity $231,803

    Non Current Liabilities

    Bank loan payable $19,628 $19,628

    Total non current liabilities $19,628

    Current Liabilities

    Accounts payable $57,000

    Income taxes payable 28,669

    Total current liabilities $85,669

    Total Liabilities $105,297

    Total Equity and Liabilities $337,100

    Beginning retained earnings 41,800$

    Add net income 43,003

    Deduct dividends (3,000)

    Ending retained earnings 81,803$

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    End of Chapter 15