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Problem 10-3 Master Budget

Problem 10-3 Master Budget
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MT425 / MT 425
Managerial Finance and Accounting
Kaplan University (KU Campus)

James Jiambalvo
Managerial Accounting, 4e
Hoboken, NJ: John Wiley & Sons.

Unit 8: Budgets and Performance Evaluation

Chapter 10 Problem 10-3 Master Budget [LO 2] Techlabs operates a computer training center. The following data relate to the preparation of a master budget for January 2012. 1. At the end of 2011, the company’s general ledger indicated the following balances:


2. Tuition revenue in December 2011 was $80,000, and tuition revenue budgeted for January 2012 is $90,000.
3. Fifty percent of tuition revenue is collected in the month earned, and50 percent is collected in the subsequent month. The receivable balance at the end of 2012 reflects tuition earned in December 2012.
4. Monthly expenses (excluding interest expense) are budgeted as follows: salaries, $40,000; rent, $5,000; depreciation on equipment, $7,000; utilities, $800; other, $2,000.
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 2011 represents money owed for the purchase of computer equipment in December 2011.
6. The company intends to purchase $30,000 of computer equipment in January2012. The anticipated $7,000 per month of depreciation (see number 4) reflects the addition of $1,000 of monthly depreciation related to this purchase.
7. The note is at 10 percent per annum and requires monthly interest payments of $500. The payments are made on the 20th of each month. The principal must be paid in February of 2013.
8. The tax rate is 35 percent.

Complete the following budgets:
a) Cash Budget
b) Budget Income Statement
c) Budgeted Balance Sheet



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