The statement of financial position of Picture This, Inc., a distributor of photographic supplies,
as of May 31 is given below:
PICTURE THIS, INC.
Statement of Financial Position
May 31
ASSETS
Cash
Accounts receivable
Inventory
Buildings and equipment, net of depreciation
Total assets
P 8,000
72,000
30,000
500,000
P 610,000
LIABILITIES AND EQUITY
Accounts payable, suppliers
Note payable
Share capital, no par
Retained earnings
Total liabilities and equity
P 90,000
15,000
420,000
85,000
P 610,000
Picture This, Inc., has not budgeted previously, and for this reason it is limiting its master budget
planning horizon to just one month ahead – namely, June. The company has assembled the
following budgeted data relating to June:
a. Sales are budgeted at P250,000. Of these sales, P60,000 will be for cash; the remainder
will be credit sales. One-half of a month’s credit sales are collected in the month the
sales are made, and the remainder is collected in the month following. All of the May 31
accounts receivable will be collected in June.
b. Purchases of inventory are expected to total P200,000 during June. These purchases will
all be on account. Forty percent of all inventory purchases are paid for in the month of
purchase; the remainder is paid in the following month. All of the May 31 accounts
payable to suppliers will be paid during June.
c. The June 30 inventory balance is budgeted at P40,000.
d. Operating expenses for June are budgeted at P51,000, exclusive of depreciation. These
expenses will be paid in cash. Depreciation is budgeted at P2,000 for the month.
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e. The note payable on the My 31 statement of financial position will be paid during June.
The company’s interest expense for June (on all borrowing) will be P500, which will be
paid in cash.
f.
New warehouse equipment costing P9,000 will be purchased for cash during June.
g. During June, the company will borrow P18,000 from its bank by giving a new note
payable to the bank for that amount. The new note will be due in one year.
Required:
1. Prepare a cash budget for June.
2. Prepare a budgeted income statement for June.
3. Prepare a budgeted statement of financial position as June 30.
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