ACCT 210 1st Edition Lecture 16 Outline of Current Lecture I. Chapter 5II. E9-1Current LectureI. Chapter 5a. In preparing budget, begin with revenue/sales then determine costsb. Budgets are done in 2 ways:i. Bottoms up1. People at lower levels and each department prepares own budget2. Head CEO reviews themii. Top down1. CEO starts budget process2. Bottom layers/departments prepare budgets based upon that3. More aggressive methodc. Zero based budgeting vs. incremental budgetingi. Zero based: assume zero as baseline, build cost base from scratch. More common/difficult/time consuming methodii. Incremental: used by federal government. Based upon last year’s budget II. E9-1a.April May June TotalFeb sales ($230,000)(20% Feb, 70% March, 10% April)23,000 $23,000March sales ($260,000)(20% March, 70% April, 10% May)182,000 26,000 $208,000April sales ($300,000)(20% April, 70% May, 10% June)60,000 210,000 30,000 $300,000May sales ($500,000)(20% May, 70% June, 10% July)100,000 350,000 $450,000June sales ($200,000)(20% June, 70% July, 10%August)40,000 $40,000Total cash collections$265,000 $336,000 $420,000 $1,021,000b.i. Accounts receivable = 10% of May paid in July + 70% of June paid in July +10% of June paid in Augustii. A/R = (10% * 500000) + (70% * 200000) + (10% * 200000)iii. A/R = 50000 + 140000 + 20000iv. A/R =
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