I need to saw how I got the answer each apart of the problem I know how to set of different apart of balance sheet 1. Comprehensive budgeting The balance sheet of Watson Company as of December 31,

I need to saw how I got the answer each apart of the problem I know how to set of different apart of balance sheet

1. Comprehensive budgeting

The balance sheet of Watson Company as of December 31, 20X1, follows.

WATSON COMPANY

Balance Sheet

December 31, 12X1

Assets

Cash $4,595

Accounts receivable 10,000

Finished goods (575 units x $7.00) 4,025

Direct materials (2,760 units x $0.50) 1,380

Plant & equipment $50,000

Less: Accumulated depreciation 10,000 40,000

Total assets $60,000

Liabilities & Stockholders’ Equity

Accounts payable to suppliers $14,000

Common stock $25,000

Retained earnings 21,000 46,000

Total liabilities &. stockholders’ equity $60,000

The following information has been extracted from the firm’s accounting records:

1. All sales are made on account at $20 per unit. Sixty percent of the sales are collected in the month of sale; the remaining 40% are collected in the following month. Forecasted sales for the first five months of 20X2 are: January, 1,500 units,- February, 1,600 units; March, 1,800 units; April, 2,000 units; May, 2,100 units.

2. Management wants to maintain the finished goods inventory at 30% of the following month’s sales.

3. Watson uses four units of direct material in each finished unit. The direct material price has been stable and is expected to remain so over the next six months. Management wants to maintain the ending direct materials inventory at 60% of the following month’s production needs.

4. Seventy percent of all purchases are paid in the month of purchase; the remaining 30% are paid in the subsequent month.

5. Watson’s product requires 30 minutes of direct labor time. Each hour of direct labor costs $7.

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