COMPUTATIONS FOR BUDGETED FIGURES IN THE MASTER BUDGET-

TRADING CONCERN

In computing for other figures for inclusion in the master budget of a trading
concern the following formulae may be applied:

Budgeted purchases : Budgeted sales + Desired ending inventory

- Beginning inventory

Budgeted operating expenses : Fixed expenses + Variable expenses

Pasig Trading Co., Inc. is making its 21G financial plans based on the following:
Planned level of sales 20,000 units @ P20
Merchandise inventory, Jan 1, 21G 1,500 units @ P 8
Desired inventory, Dec 31, 21G 3,000 units
Unit purchase cost in 21G P 12
Fixed operating expenses per annum
(including depreciation charge, P15,000) P 50,000
Variable operating expenses per unit P 4
Interest expense P 14,500
Income tax rate 35%

Compute the following:

1. Budgeted purchases (in volume & peso amount)
2. Budgeted cost of sales (with breakdown)
3. Budgeted operating expenses (Fixed & Variable)
4. Prepare the following budgeted statements
a. Budgeted income statement
b. Cash budget – Pasig Trading Co., Inc. has budgeted the following cash flows
for 21G
Collection on sales P365,000
Payment for purchases 210,000
Payment for expenses 108,000
Payments for interest expense 10,000
Payments for income tax 10,000
Acquisition of additional equipment 50,000
Loan amortization, excluding interest 22,000
Dividends 10,000
Sale of old pieces of furniture (at book value) 12,000
Issuance of additional shares of stock (80 shares
At P120) 9,600
Cash balance on Jan 1, 21G is P12,000 and desired minimum ending cash
balance is P4,000. The corporation can obtain 15% loans in multiples of
P10,000 should it need additional funds.

c. Budgeted Balance Sheet

The beginning balance sheet of Pasig Trading Co., Inc. shows the following
account balances:
Cash P12,000
Accounts receivable- net 8,000
Merchandise inventory 12,000
Property and equipment 39,500
Total assets P71,500

Accounts payable P 8,000

Income tax payable 10,000
Loans payable 30,000
Capital stock, par value per share – P100 18,000
Retained earnings 5,500
Total liabilities and equity P71,500