Solution Guide

Assignment on Short – Term Budgeting

1. Actual sales 2021 at the last quarter of 2021

Accounts receivable – 12/31/ 2021 (40% of the quarter’s sales) P 120,000.00
Divided by: 40%
Actual sales, 4th Quarter 2021 P 300,000.00

2.

Elliana Inc.
Budgeted Income Statement
For the Year 2022

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total

Sales 280,000.00 320,000.00 360,000.00 352,000.00 1,312,000.00
Less: Cost of goods sold -
FG, Beginning inventory 44,000.00 56,000.00 52,000.00 60,000.00 44,000.00
Add: Production cost 192,000.00 200,000.00 224,000.00 200,000.00 816,000.00
Cost of goods available for sale 236,000.00 256,000.00 276,000.00 260,000.00 860,000.00
Less: FG, Ending Inventory 56,000.00 52,000.00 60,000.00 48,000.00 48,000.00
Cost of goods sold 180,000.00 204,000.00 216,000.00 212,000.00 812,000.00
Gross income 100,000.00 116,000.00 144,000.00 140,000.00 500,000.00
Less: Operating expenses 64,000.00 68,000.00 72,000.00 76,000.00 280,000.00
Income before tax 36,000.00 48,000.00 72,000.00 64,000.00 220,000.00
Less: Tax (32%) 11,520.00 15,360.00 23,040.00 20,480.00 70,400.00
Net income 24,480.00 32,640.00 48,960.00 43,520.00 149,600.00

The total budgeted cost of goods sold for the year 2022 is P 812,000.00

3. As per the budgeted income statement presented above, net income for the year is P
149,600.00. Since the year’s budgeted net income is not less than P 120,000, a total of P 40,000
of dividends shall be paid during the year.

4.

Total production costs 816,000.00

Add: Total operating costs 280,000.00
Total production and operating costs 1,096,000.00
Less: Depreciation ([P 44,000 + 12,000] x 4) 224,000.00
Cash disbursements for production cost and operating expenses 872,000.00

5.

Elliana Inc.
Cash Budget
For the Year 2022

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total

Cash balance beginning 76,000.00 152,000.00 360,000.00 352,000.00 76,000.00
Add: Receipts -
Current Quarter - 60% of sales 168,000.00 192,000.00 216,000.00 211,200.00 787,200.00
Previous quarter - 40% 120,000.00 112,000.00 128,000.00 144,000.00 504,000.00
Total receipts 288,000.00 304,000.00 344,000.00 355,200.00 1,291,200.00
Total cash available 364,000.00 456,000.00 704,000.00 707,200.00 1,367,200.00
Less: disbursements
Production cost, net of
depreciation of 44,000.00/qtr 148,000.00 156,000.00 180,000.00 156,000.00 640,000.00
Operating cost, net of
depreciation of P 12,000/qtr 52,000.00 56,000.00 60,000.00 64,000.00 232,000.00
Dividends (June and December) - 20,000.00 20,000.00 40,000.00
Income Tax 12,000.00 11,520.00 15,360.00 23,040.00 61,920.00
Total disbursements 212,000.00 243,520.00 255,360.00 263,040.00 973,920.00
Cash balance, ending 152,000.00 212,480.00 448,640.00 444,160.00 393,280.00
6.

Quarter 4 sales 352,000.00

0.40
Accounts Receivable, 12/31/2022 140,800.00

7. The company uses JIT purchasing system for acquisition of materials. Since under JIT system,
inventories are kept at minimum or zero, no inventory was maintained for materials. The ending
inventory balance of P 48,000 which was already given was composed of finished goods only.

8. P 20,480.00 Provision for income tax in the 4th quarter of 2022 will be paid in the first quarter of the
following year. This will therefore be the balance of income tax payable as of the end of this year.

9.

Retained earnings, beginning balance (fr. Balance sheet) P 168,000.00

Add: Budgeted net income, 2022 (from Income Statement) 149,600.00
Total P 317,600.00
Less: Dividends paid 40,000.00
Retained earnings, December 31, 2022 P 277,600.00

10.
Plant and Equipment, January 1, 2022 P 580,000.00
Less: Depreciation ([44,000 + 12,000] x 4) 224,000.00
Plant and Equipment, December 31, 2022 P 356,000.00

11.
Cash (from #5) P 393,280.00
Accounts Receivable (from #6) 140,800.00
Inventories (given) 48,000.00
Plant & Equipment (from #10) 356,000.00
Total Assets P 938,080.00