Techlabs operates a computer training center.The following data relate to the pr
ID: 2396553 • Letter: T
Question
Techlabs operates a computer training center.The following data relate to the preparation of a master budget for January 2015.
1. At the end of 2014,the company’s general ledger indicated the following balances:
Debits Credits
Cash $ 60,000 Accounts Payable $ 40,000
Accounts receivable 40,000 Note payable 60,000
Equipment (net) 120,000 Common stock 30,000
Retained earnings 90,000
Total $220,000 $220,000
2. Tuition revenue in December 2014 was $80,000,and tuition revenue budgeted for January 2015 is $110,000.
3. Fifty percent of tuition revenue is collected in the month earned,and 50 percent is collected in the subsequent month.The receivable balance at the end of 2014 re?ects tuition earned in December 2014.
4.Monthly expenses (excluding interest expense) are budgeted as follows:salaries,$60,000; rent,$4,000;depreciation on equipment,$8,000;utilities,$2,000;other,$800.
5. Expenses are paid in the month incurred.Purchases of equipment are paid in the month after purchase.The $40,000 payable at the end of 2014 represents money owed for the purchase of computer equipment in December 2014.
6. The company intends to purchase $50,000 of computer equipment in January 2015.The anticipated $8,000 per month of depreciation (see number 4) re?ects the addition of $2,000 of monthly depreciation related to this purchase.
7. The note is at 15 percent per annum and requires monthly interest payments of $750. The payments are made on the 20th of each month.The principal must be paid in February 2016.
8. The tax rate is 35 percent.
Required
Complete the following budgets:
a.
Techlabs Cash Budget For January 2015
Cash receipts
Collection of December 2014 tuition $
Collection of January 2015 tuition
Total cash receipts
Cash disbursements
Payment of salaries
Payment of rent
Payment of utilities
Payment of other expenses
Payment for purchases of computer equipment
Payment of interest on note
Payment of taxes (How do you calculate this?)
Total disbursements
Excess disbursements over receipts
Plus beginning cash balance
Ending cash balance $
b.
Techlabs Budget Income Statement For January 2015
Tuition revenue $
Less:
Salaries
Rent
Utilities
Depreciation
Other
Interest expense
Total expense
Income before taxes
Taxes on income
Net income $
c.
Techlabs Budgeted Balance Sheet As of January 31,2015
Assets
Cash $
Accounts receivable
Equipment (net)
Total assets $
Liabilities
Accounts payable $
Note payable
Total liabilities $
Stockholders’equity
Common stock
Retained earnings
Total stockholders’equity
Total liabilities and stockholders’equity $
Explanation / Answer
Techlabs Cash Budget For January 2015
Cash receipts
Collection of December 2014 tuition $
$ 40,000.00
Collection of January 2015 tuition
$ 55,000.00
Total cash receipts
$ 95,000.00
Cash disbursements
Payment of salaries
$ 60,000.00
Payment of rent
$ 4,000.00
Payment of utilities
$ 2,000.00
Payment of other expenses
$ 800.00
Payment for purchases of computer equipment
$ 40,000.00
Payment of interest on note
$ 750.00
Payment of taxes
$ 12,057.50
Total disbursements
$ 119,607.50
Excess disbursements over receipts
$ (24,607.50)
Plus beginning cash balance
$ 60,000.00
Ending cash balance
$ 35,392.50
Techlabs Budget Income Statement For January 2015
Tuition revenue
$ 110,000.00
Less: Operating Expenses
Salaries
$ 60,000.00
Rent
$ 4,000.00
Utilities
$ 2,000.00
Depreciation
$ 8,000.00
Other
$ 800.00
Interest expense
$ 750.00
Total expense
$ 75,550.00
Income before taxes
$ 34,450.00
Taxes on income
$ 12,057.50
Net income
$ 22,392.50
Techlabs Budgeted Balance Sheet As of January 31,2015
Assets
Cash
$ 35,392.50
Accounts receivable
$ 55,000.00
Equipment (net)
$ 162,000.00
Total assets
$ 252,392.50
Liabilities
Accounts payable
$ 50,000.00
Note payable
$ 60,000.00
Total liabilities
$ 110,000.00
Stockholders’equity
Common stock
$ 30,000.00
Retained earnings
$ 112,392.50
Total stockholders’equity
$ 142,392.50
Total liabilities and stockholders’equity
$ 252,392.50
Techlabs Cash Budget For January 2015
Cash receipts
Collection of December 2014 tuition $
$ 40,000.00
Collection of January 2015 tuition
$ 55,000.00
Total cash receipts
$ 95,000.00
Cash disbursements
Payment of salaries
$ 60,000.00
Payment of rent
$ 4,000.00
Payment of utilities
$ 2,000.00
Payment of other expenses
$ 800.00
Payment for purchases of computer equipment
$ 40,000.00
Payment of interest on note
$ 750.00
Payment of taxes
$ 12,057.50
Total disbursements
$ 119,607.50
Excess disbursements over receipts
$ (24,607.50)
Plus beginning cash balance
$ 60,000.00
Ending cash balance
$ 35,392.50
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