Week 4 Mods - "r: “-."1-_'_- __r T w'...

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Unformatted text preview: "r: “-."1-_'_- __r T w' am“ I hflpstt’r'dmmnymdmstebPagG/flashfcontentu’studentflearningExerci5e.aspxkourseID:458194951userIDleUQlTSBtdssID:l386-1roletype:STUDEACUU a 1 E I Walk me through a similar problem Income Statement Month,Year Once a company budgets their sales, purchases, expenses, Simplified "160019 Statement and cash they can prepare their budgetedfinancial statements. One ofthese important statements is the Income Statement. Sales — Cost ofGoods Sold Many investors are very interested in the bottom line ofthe = Gross Margin income statement and have made an investment in hopes that it - 0106f Expenses would be a high positive number. Ideally, we would be able to = Net Income see into the future but since that is not possible, this is as close as we can get. Also, we may be able to strategize as a company as to howto improve our bottom line ifwe needto. For example, we might do a big sales push atthe end ofthe year in an elTortto finish where we hope to. Nowthat we know the value ofthis budgeted income statement, let's move on and learn howto calculate it. Continue «:3 v 6110000 v Egg." ' —. -. - g] httpstfr'd mMMdMWebPagfilflash.-"c o ntenb’student-‘Iea rningExerci 5e.aspx?courseID:45819-‘19 Btu serID21309179 StdssID: 138 Stroletyp e: STU D St: ou a l E I Walk me through a similar problem Balance Sheet 2] Marc“ 31 I ' Income Statement Cash $10,000 Month,Year accounts Receivable $401100 Simplified Income Statement: Inventory $25,000 Buildings and equipment $240,000 sales Total Assets $315,000 30m - DtherExpenses Accounts Payable $63,000 . . = “3‘ "1mm Notes Payable $37,000 Common Stock $50,000 Retained Earnings $115,000 Total Liabilities + Dwners' $315,000 Equity Sales forthe month oprril are estimatedto be $200,000 with 40% ofsales collected in the month ofsale and 60% collected in the month alter. All March 31 receivables will be collected in April. Purchases forthe month oprril are estimated at $120,000 with 20% ofpurchases being paid in the month of purchase and 80% in the month alter. All accounts payable from March 31 will be paid olTin April. Ending inventoryforApril is budgeted at $36,000. Selling and administrative expenses forApril are expectedto be $15,000, exclusive of depreciation. Depreciation is budgetedto be $5,000. The interestonthe note that will be incurredforApril and paid in April is $1,300. New equipmentfor $10,000 will be purchased. During April, the company will borrow an additional $9,000 which willbe duein 1 year. E' t \ Done 9 Internet | Protected Mode: On {a V 611.00% V ‘ 'I ‘ ' I a, https:.-".-"dms .devryed u.-"d n15.-"‘."."ebPa g esr'flas h.-"c o ntent-"studentr'lea rningExerci seas px? courseID24-581949 fituserIDleUQUQ fithEEID: 138 Stroletyp 5: ST U D St: ou g I E I Walk me through a similar problem fl in the month alter. All March 31 receivables will be collected in bl April. Purchases forthe month oprril are estimated at Rockpark Inc $120,000 with 20% ofpurchases being paid in the month of Balance Shee purchase and 80% in the month alter. All accounts payable from March 31 March 31 will be paid ofi'in April. Ending inventoryforApril is W budgeted at $36,000. Accounts Receivable $40,000 Selling and administrative expenses forApril are expectedto be Inventory $25300 $15,000, exclusive of depreciation. Depreciation is budgetedto . . . be $5,000. The interest on the note that will be incurredforApril Bulldmgs and equ'pmem $24n'mm and paid in April is $1,300. New equipmentfor $10,000 will be Total Assets $315,000 purchased. During April, the company will borrow an additional $9,000 which will be due in 1 year. Accounts Payable $6 3,000 The company prepares a budgeted income statement forApril Notes Payable $87,000 based on this data. Let s start atthe top. Common Stock $50I000 What are the budgeted sales on the income statementforApril Ratflifled Earnings $115000 “"de'me accrue” “ESP? Total Liabilities + Dwners' $315,000 Equity Budgeted sales for april = $ Key Data for April: I Sales $200,000 (collected 40% in month ofsale, 60% month alter) Purchases $120,000 (20% paid in month ofsale, 80% month alter) All Accounts receivable and payables from March paid in April. April 30 ending inventory $36,000. Selling and admin expenses $15,000 Depreciation $5,000 Interest $1,300 New equipment bought $10,000 New loan taken $9,000 \/ Th at's correct. Nowthat we have determinedthe amount ofsales underthe accrual method, let's look atthe cost ofgoods sold balance. What is the cost ofgoods sold for April? cost ofgoods soldforApril = $ I:I —l;l \_ _/ Done 9 Internet | Protected Mode: On fa ' @110093 7 _ " r‘C‘ ‘ -_ E X .. I g, httpsflfdmsdevlytdufd mstebPa g Efflashfcontenti’studenti’lea rningExerciseespficourseID245819495tuserID21309179Std:SID: 138 Stroletyp 5: ST U D St: ou a I E I Walk me through a similar problem I l:l Next. let's look atthe other expenses. What is the total amount ROCKDEFK "16 ofother expenses? Balance Sheet March 31 Totalamountofotherexpenses : $ Cash $10,000 Accounts Receivable $40,000 Inventory $25,000 X Goodtry! Rememberthat we are only looking atthe income Buildings and equipment Mango statement deductions here. lfwe buy something, it doesn't mean it is classified as an expense. Tma' 033913 33151100 Please W again Accounts Payable $63,000 Notes Payable $87,000 Next. let's look atthe other expenses. What is the total amount Common Stock $50,000 “other expense“ Retained Earnings $115,000 Total amount ofotherexpenses = $ Egtjltyl'labnmes +Dwners $315000 Key Data forApril: X Good effort but that is still incorrect. You needto add I togetherthe income statement accounts only so selling and administrative expense $15,000 + depreciation expense $5,000 + interest expense $1,300 = $21,300 Sales $200,000 (collected40% in month ofsale, 60% month alter Purchases $120,000 [20% paid in month ofsale, 80% month afie All Accounts receivable and payables from March paid in April. April 30 ending inventory $36,000. Selling and admin expenses $15,000 Depreciation $5,000 lnterest$1,300 New equipment bought $10,000 Newloan taken $9.000 Nowthat we know the sales and cost ofgoods sold and other expenses, let's look at net income. What is the amount ofnet income forthe month oprril? Done 9 Internet | Protected Mode: On 4‘5 V 100% V I. ;" E, E, I E, httpsoffd ms.devly.edufd mstebPa g Efflashfcontentr’studentrlearningExerciseespflcou5:10:45819495tuser102130917951d551E): 138 Stroletyp 5: ST U D St: ou a I E I Walk me through a similar problem fl bl X Good etTort but that is still incorrect. You needto add togetherthe income statement accounts only so selling and administrative expense $15,000 + depreciation expense $5,000 + interest expense $1,300 2 $21,300 Nowthat we know the sales and cost ofgoods sold and other expenses, let's look at net income. What is the amount ofnet income forthe month oprril? NetincomeforApril = $ \/ Th at's correct. The income statement is a critical financial statement to the companyfor many reasons. Investors focus on net income to see ifthe company is making money and ifthey will have dividends available to them or at least substantial future stock growth. Creditors and our banks will want to reviewthese to make sure we are not an increased risk. Managementwill be interested in this statement especially ifbonuses might be tiedto these numbers. There are many reasons that a companywill want a high bottom line so knowing in advance as to what that might be will helpthem set up a new strategy ifneeded. v r.\ , _-. /.| Done 9 Internet | Protected Mode: On Vfla ' Q1003; V _.5 E ' x . I I- I g, httpsflfdrnsdevlytdufd-mstebPagEfflashfcontentfstudentflearnEngExercEeaspxkourseID:4581949&userID:I309179&d5SID:l385troletype:STUDStcou a I E I ‘7 Welcome. Roger Gulledge E. Budgeted Income Statement Fri [52.332010 1 '/ St 15-.-'-.-'asl'r Corporation nastltetollo. :alance sheetas of Stone-.'-.-asn Corporation Balance Sheet Jun Cash ELI-ogeteciletlncone = '“ (J at I I :.ounts RECEHGCIE In . entor, Euilcings anc equip ‘TEITI Total L. That is incorrect. Underthe accrual method. we need to include sales as they are earned and cost of goods sold and expenses as they are incurred. Also. don‘tforgetto considerthe beginning and ending inventory in your cost of goods sold calculations. '—.=:-:ounts Pa, a :le Notes Pa_.a:Ie {to-"1 no n St 0:..- r Retains-3 Earnings Pleasetryagain. Total Lia :ilities + C-.-'-.-'ners' E=:;uit_. Salestortne 1ontl'r ofJLil_. is estinat calm: mil .. . . in the. month of sale an.. n tli f . n th»: *1 nnth -4 _1 Done 0 Internet | Protected Mode: On {5 V @1100'36 V ‘: Efl‘ I g, httpsotfd msdevlytdufdmstebPeg fiftieshal'contentfstudentfleerningExercEsempxkou rseID:4581949&|5erID:I309179 BidssID: 138 Stroletyp 5: ST U D Etc ou g I E I ‘7 Welcome. Roger Gulledge E. Budgeted Income Statement Fri [32.332010 1 '/ Con “ion Stoo: Retaineo Earnin-;s Total Liacilities + C-.-'-.-'ners' E=:iuit_. Salesforthe 1onth ofJLil. is esti‘tateo sale =:o eet n the “tenth of sale after. éilJune s-II re-:ei.acies - th of J ul_. are esti “tat g paic in the ‘1-3Iitl‘l-3fl2‘Ll amounts pa_.'a:|e fro-‘1 June in.entor_. forJul;. is cue; (I) 0 Net Inoo he = nonth in Jul Purol'rasesfor ' ofpur: ases 1the nonth after. L.|| Incorrect That is incorrect. Rememoerthatthe formula for net income is ~1il1i5tr3ti-,g :vpgfiggg tor-Jul, are er 1:." t. . sales — cost of goods sold — expenses = net income. You need ".e of oer 'ation is :u to also considerthe sales thatwere earned regardless otwhen it stonthe was collected. in Jul. is c ip “tentfnr Duri LII :an_. -.-'-.-'ill cor :e c e in 2 _.ears. F'leasetry'again. The oonpan. prepares a 2 on this oata. '.'.-hat isthe 2 Lin-:erthe -.. Lial :asis? 3"‘1-3Lll1t of net inoo ‘19 for Jul. Done 0 Internet | Protected Mode: On {a ' 6110095 7 __. _ E;. 'I .- I g, httpsofll'd msdeuwtdufd-mstebPag fiftieshal'contentfstudentfleerningExerciseespxkou rseID:4581949&|5erID:I309179 BtdssID: 138 Stroletyp 5: ST U D St: ou a I E I ‘7 Welcome. Roger Gulledge E. Budgeted Income Statement Fri [52.332010 1 V Co ‘1 non Stoo: Retaineo Earnings Total Liacilities + C-.-'-.-'ners' E=:iuit_. (I) Eucgetec iiet Inoo he = no nth of sale after. éilJune .acies ' the . onth ofJuI_. are esti “tat c paic in the ‘1-3Iitl‘l-3fl2‘Ll Greatjop! You have a good understanding of preparing a budgeted income statement andwhatto include underthe a n— accrual basis. I; .5 ation is :u ' F for Jul; ano paio You have completed all ofthe Learning Exercises in this set. Duri I CBC - Please close this window and proceed to the next part of the Module. The oonpan. prepares a 2 on this cata. ' . at isthe :L . - -. a-“tount of net inco we forJull. uncerthe a=:.iua| :asis? Done 9 Internet | Protected Mode: On {a V 3110096 V Walk me through a similar problem Once a company budgets their sales, purchases, expenses, and cash, they can go ahead and prepare budgetedfinancial statements. One ofthese important statements is the Balance Sheet. A Balance Sheetwill show the estimatedtotal assets, liabilities and owners' equity. This shows the investors what resources are available to the company andwhat liabilities they are going to be responsible for paying in the future. An investor or lender may be able to identify areas ofconcern from this statement if the assets seem to low orthe liabilities seemtoo high for example. They can also see information such as the total amount of stock issued and the types of stock. Nowthatwe knowthe value ofthis budgeted balance sheet, let's move on and learn howto calculate it. - Continue I Assets 2 Liabilities + Dwners' Equity Balance Sheet Month, Year Simplified Balance Sheet: Current Assets + Long TermfFixed Assets + DtherAssets =Total Assets Current Liabilities + Long Term Liabilities + Common and Preferred Stock +Retained Earnings = Liabilities and Owners' Equity Done 0 lntemet| protected Mode On 03 - Q 100% v fl httpsfldmsdevryedufdrnWebpagesfflashfcontenti'studentflearningExercise.aspx?courseID:4581949StuserID:lBUQlEStdssIDleSStroletype: STUDBtcou a X Walk me through a similar problem —E| Begining cash balance forJuly = $ 10000 \/ That's correct. Next, let's look atthe other additions (debitslto cash. How much is addedto the cash balance during July”? Added cashin July = $ 240000 \/ That's correct. Next, let's look atthe reductions (creditslto cash. How much is deductedfrom cash forthe month? Deduction from cash forthe month = $ 105000 \/ That's correct. Nowthatwe have identifiedthe beginning balance, additions to and subtractions from cash, we can determine the ending cash balance. How much is the ending cash balance as ofJuly 31, 2008? Ending cash balance forJuly = $ 03000 Balance Sheet J 0 He 30 Cash $18,000 Accounts Receivable Inventory $52,000 $37,000 Buildings and equipment, net of depreciation $195,000 Total As sets $302,000 Accounts Payable $44,000 Notes Payable $30,000 Common Stock $100,000 Retained Earnings $78,000 Total Liabilities + Dwners' Equity Key Data: Net Income: $33,000 Cash Receipts: $240,000 Cash Disbursements: $165,000 Ending Accounts Receivable: $54,000 Ending Inventory: $31,000 Equipment purchased: $10,000 Ending Accounts Payable: $27,000 Ending Notes Payable: $90,000 El $302,000 l-c-Tf'l:.:::" a Internet| Protected Mode: 0n Walk me through a similar problem we are reauy lU SUIVE ll'le I'dSl piece, DUIIUII’IQS 'dl'lU EQUIUI'I'IEI'IL What is the balance as ofJuly 31 for building and equipment, Lemonadecompany net of depreciation? Balance Sheet June 30 Cash $93,000 Accounts Receivable $54,000 \/ That's correct. Inventory $37,000 Buildings and equipment, net $205,000 of depreciation Total Assets $383,000 Balance forJuly = $ 205000 Nowthatwe knowthe cash, accounts receivab e, inventory, and buildings and equipment, net of deprecation, what is the total for the assetsection'? Accounts Payable $27,000 Total forassetsection = $ 383000 Notes Payame 590.000 I Common Stock $100,000 Retained Earnings $166,000 Total Liabilities + Dwners' $333,000 Equity \/ That's correct. The balance sheet is a critical financial statementto the companyfor many reasons. Investors like to knowwhat resources the company has andwhat responsibilities they have to their creditors and other investors. Investors wantto see that they will have a return on their investment as time goes on. Creditors also like to see the resources and responsibilities of the company so they can ensure that theywill be paid back for any borrowings. Managementwill want to make sure that they are utilizing their resources to the best oftheir ability and keeping their ratios under control. Ely budgeting the balance sheet, we can plan for any problems that might arise in the future. a Internet| Protected Mode: On {a V 6110096 V -———- _ _ _ _ "'J ...
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Week 4 Mods - "r: “-."1-_'_- __r T w'...

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