Fundamental managerial accounting concepts 9th edition edmonds solutions manual

Fundamental Managerial Accounting Concepts 9th Edition Edmonds Solutions Manual Visit to download the full and correct content document: https://testbankdeal.com/dow nload/fundamental-managerial-accounting-concepts-9th-edition-edmonds-solutions-m anual/

ATC 7-1 a.

Budgeted Financial Statements Income Statement Sales Revenue Cost of Goods Sold Depreciation Expense Other Expense Operating Income Interest Expense Net Income

Amounts Computations $300,000 12 x $25,000 (264,000) 12 x $22,000 (3,000) ($18,000 – $6,000) ÷ 4 (4,000) $22,000 – $18,000 29,000 (850) $17,000 x .05 $28,150

Statement of Cash Flows Operating Activities: Inflows from sales Outflows for: Purchase of food, etc.

Other initial expenses Interest Expense NCF Operating Activities

(264,000) 12 x $22,000 (4,000) $22,000 – $18,000 (850) $17,000 x .05 31,150

Investing Activities: Outflow for purchase of cart

(18,000) given

Financing Activities: Inflows from: Contribution by owners Loan from parents Financing Act. Net Change in Cash Plus beginning cash Ending cash balance

5,000 given 17,000 given 22,000 35,150 0 $35,150

$300,000 12 x $25,000

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ATC 7-1 continued Budgeted Financial Statements continued Balance Sheet Cash Food cart Acc. Depreciation Total Assets

Amounts Computations $35,150 from SCF 18,000 given (3,000) ($18,000 – $6,000) ÷ 4 $50,150

Note Payable

$17,000 given

Contributed Capital Retained Earn.

Total Liab. & Equity

5,000 given 28,150 from Inc. Statement $50,150

b. The budget financial statements above assume sales for each month of the year will be approximately equal to sales for September and October. Most likely, sales will be lower during periods between semesters, during the colder months, and during the summer session.

On the plus side, some of the initial expenses of $4,000 ($22,000 $18,000) may not have to be incurred every year.

Also, the presentation above assumes the owners do not take any money out of the business. Obviously, they would need to use some of the earnings from the business to pay their living expenses.

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ATC 7-2 a.

Group Tasks

Task 1 Cash sales Sales on account Total budgeted sales

Pro Forma October November December Data $ 40,000 $ 44,000 $ 48,400 140,000 154,000 169,400 $169,400 Accounts Rec. $180,000 $198,000 $217,800 595,800 Sales Rev.

Schedule of Cash Receipts Cash sales Collections from accounts receivable Total cash collections

October November December $ 40,000 $ 44,000 $ 48,400 60,000 140,000 154,000 $100,000 $184,000 $202,400

Task 2

Budgeted cost of goods sold Plus: Desired ending inventory Inventory needed Less: Beginning inventory Required purchases (on account)

Oct. Nov. Dec. $72,000 $79,200 $87,120 14,400 15,840 17,424 86,400 95,040 104,544 40,000 14,400 15,840 $46,400 $80,640 $88,704

Pro Forma Data $238,320 Cost of Goods Sold 17,424 Ending Inventory

22,176 Accounts Payable

Schedule of Cash Payments Budget for Inventory Purchases October November December Pmt of current month's accts. pay. $34,800 $60,480 $66,528 Pmt for prior month's accts. pay.

72,000 11,600 20,160 Total budgeted pmts. for inventory $106,800 $72,080 $86,688

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ATC 7-2 (continued) a.

Task 3

Oct. Nov. Dec. Sales commissions $ 7,200 $ 7,920 $ 8,712 Supplies expense 1,800 1,980 2,178 Utilities 2,200 2,200 2,200 Depreciation on store equipment 1,600 1,600 1,600 Salary expense 34,000 34,000 34,000 Rent 6,000 6,000 6,000 Miscellaneous 1,000 1,000 1,000 Total S&A expenses $53,800 $54,700 $55,690

b.

Pro Forma Data $ 8,712 Commissions pay.

2,200 Utility payable 4,800 Accum. dep.

$164,190 S&A Exp.

Financial Statements Income Statement Sales revenue Cost of goods sold Gross margin Operating expenses Operating income Interest expense Net income

$595,800 (238,320) 357,480 (164,190) 193,290 (2,530) $190,760

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ATC 7-2 (continued) b.

Balance Sheet Assets Cash Accounts receivable Inventory Store equipment Accumulated depreciation store equipment Book value of store equipment Total assets

$ 9,760 169,400 17,424 $200,000 (81,600) 118,400 $314,984

Liabilities Accounts payable Utilities payable Sales commissions payable Line of credit Equity Common stock Retained earnings Total liabilities and equity

c.

$ 22,176 2,200 8,712 23,936 50,000 207,960 $314,984

Havel will need to borrow money in October.

Cash Budget for October Beginning cash balance Add: Cash receipts Cash available Less: Payments For inventory purchases For S&A expenses Total budgeted payments

$ 16,000 100,000 (1) 116,000

Payments minus receipts = shortage

$ 33,600

106,800 (2) 42,800 (3) 149,600

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ATC 7-2 (continued) c.

(1) $40,000 cash sales + $60,000 collection on September accounts receivable.

(2) $34,800 payment for Oct. Inventory + $72,000 payment on September accounts payable.

(3) $53,800 October S&A expenses – $7,200 sales commissions – $2,200 utilities expense – $1,600 depreciation = $42,800

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ATC 7-3 a.

There was a budgeted surplus in 6 years of the 59 years from 1960 to 2018: 1960, 1969, 1998, 1999, 2000, 2001. Thus, a deficit was reported in 53 years.

b.

2009 had a deficit of 9.8 % of GDP 2010 had a deficit of 8.7 % of GDP 2011 had a deficit of 8.5 % of GDP 2000 had the largest surplus, 2.3% of GDP

c.

For 2009: Deficit Receipts =

d.

$1,412,688 $2,104,989

67.1% of expenditures were paid for with borrowed funds, 32.9 % were paid for with tax revenues.

The departments whose budgets changed the most from the Bush years to the Obama years were: Treasury Health and Human Services Defense—Military Social Security Administration (On-budget) Social Security Administration (Off-budget) Agriculture

4.5% decrease 2.8% increase 1.8% decrease 0.9% increase 0.6% increase 0.6% increase

See the table on the following page for complete data.

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ATC 7-3 continued Comparison of Average Budget Percentages by Department for 2002 - 2009 (Bush Years) to 2010 – 2017 (Obama Years) Average Average for for Bush Obama Years Years Difference Legislative Branch 0.2 0.1 -0.1 Judicial Branch 0.2 0.2 0.0 Department of Agriculture 3.3 3.9 0.6 Department of Commerce 0.3 0.3 0.0 Department of Defense--Military Programs 18.6 16.8 -1.8 Department of Education 2.5 2.0 -0.5 Department of Energy 0.8 0.8 0.0 Department of Health and Human Services 23.4 26.3 2.8 Department of Homeland Security 1.5 1.3 -0.2 Department of Housing and Urban Development 1.7 1.3 -0.4 Department of the Interior 0.4 0.3 0.0 Department of Justice 1.0 0.8 -0.1 Department of Labor 2.5 2.4 -0.1 Department of State 0.5 0.8 0.2 Department of Transportation 2.4 2.1 -0.3 Department of the Treasury 17.8 13.3 -4.5 Department of Veterans Affairs 2.7 3.9 1.3 Corps of Engineers--Civil Works 0.2 0.2 0.0 Other Defense Civil Programs 1.7 1.7 0.0 Environmental Protection Agency 0.3 0.3 -0.1 Executive Office of the President 0.2 0.0 -0.2 General Services Administration 0.0 0.1 0.1 International Assistance Programs 0.5 0.6 0.0 National Aeronautics and Space Administration 0.6 0.5 -0.1 National Science Foundation 0.2 0.2 0.0 Office of Personnel Management 2.4 2.3 -0.1 Small Business Administration 0.1 0.2 0.0 Social Security Administration (On-Budget) 2.1 3.0 0.9 Social Security Administration (Off-Budget) 20.5 21.2 0.6 Other Independent Agencies (On-Budget) 0.8 0.4 -0.4 Other Independent Agencies (Off-Budget) 0.0 0.0 0.1 Allowances 0.0 -0.1 -0.1 Undistributed Offsetting Receipts -9.2 -6.9 2.3 (On-budget) -5.0 -3.6 1.4 (Off-budget) -4.2 -3.3 0.9 Total outlays 100.0 100.0 0.0

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ATC 7-4 The memorandum written by students should identify some of the following potential challenges.

• The USOC does not have a typical twelve month business cycle like most businesses, so results from one quarter of the year, or even one whole year, may not provide much guidance regarding how to budget for the next quarter or the next year.

• Revenue and expenses vary greatly depending on whether there is an Olympic competition to be held in a given year.

• Many of the USOC’s revenues are not correlated with activities that cause it to incur expenses, as is the case with business enterprises.

Thus, just because revenues are down it does not mean that expenses will also decline.

• Much of the USOC’s revenues come from private contributions, and it is difficult to forecast the many factors that can affect contributions.

Some examples: a weak economy may hurt contributions, even if athletes are performing well; if U.S. athletes are very successful at a given Olympics, it probably encourages contributions, and the USOC has limited control of athletic success; if there is a scandal regarding the USOC or its athletes, this may hurt contributions, even if the USOC had little ability to control the event.

• Any grants from government sources may be affected by politics.

Games may be disrupted by international events over which the USOC has no control over the event or the ability to predict the event. These events can reduce revenue unexpectedly.

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ATC 7-5 a. Mr. Cleaver’s behavior could be construed to be in violation of the objectivity standards. The failure to disclose the lack of need for computers to the Board of Education would violate (1) the standard to communicate information fairly and objectively and (2) the standard to disclose fully all relevant information that could reasonably be expected to influence an intended user’s understanding of the reports, comments, and recommendations presented.

However, Mr. Cleaver could have disclosed all information fairly to the board. He is correct in his assessment that neither he nor Ms. Simmons has the right to establish policy. Also, it should be noted that Mr. Cleaver may not be a member of the Institute of Management Accountants and is therefore not bound by the organization’s code of ethics. b. Sarbanes-Oxley Act requires management of public companies to report accurately the financial statements to external users such as investors and creditors.

This case does not involve external reporting, and, consequently, the law is not applicable. However, with recent school board scandals abound in the past ten years, many principles of Sarbanes-Oxley have been adopted by school districts. c. As its name implies, participative budgeting encourages participation by subordinates as well as upper level managers in the budget process. Information flows from the bottom up as well as from the top down during the preparation of the budget. Accordingly, the Board of Education members would be in a position to gain insight as to the true needs of the schools and would thereby be more likely to allocate funds where they would produce the greatest benefit.

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ATC 7-6 Screen capture of cell values:

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ATC 7-6 (continued) Screen capture of cell formulas:

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ATC 7-7 Screen capture of cell values:

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ATC 7-7 Screen capture of cell formulas:

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ATC 7-7 Screen capture of cell formulas (continued):

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