Transcribed Image Text: LB Enterprises (LB) is preparing its budget for the first quarter of 2019. LB’s balance sheet as of December 31, 2018 is as follows: Assets Liabilities Cash

Transcribed Image Text: LB Enterprises (LB) is preparing its budget for the first quarter of 2019. LB’s balance sheet as of December 31, 2018
is as follows:
Assets
Liabilities
Cash
$5,000
Accounts Payable
$9500
Accounts Recievable
28,000
Inventories
Direct Materials
8,100
Finished Goods (500
Units)
16,870
Stockholders Equity
Equipment – gross
45,000
Accumulated depreciation
15.000
Common Stock
$15,000
Net Equipment
30,000
Retained Earnings
63,470
Total Assets
$87,970
Total Liabilities and
$87,960
Equity
LB sells one product for $45/unit. The Company forecasts that it will sell 2,000; 1,500; 1,600; and 1,700 units
in January, February, March and April, respectively.
• Sales to customers are all on credit. 40% of the cash for these sales is collected in the month of the sale and
the remaining 60% is collected in the following month.
LB wants finished goods inventory equal to 25% of the next month’s sales on hand at the end of each
month.
LB wants direct materials equal to 75% of the current month’s production requirements on hand at the end
of each month.
Each unit of finished goods inventory requires 2.5 pound of direct materials at $3 per pound and 2 hours of
direct labor at $10.00 per hour.
Direct material purchases are paid 15% in the month they are purchased and 85% in the following month. All
other costs of the company are paid for as they are incurred.
Manufacturing Overhead consists of the following
o Indirect Materials (S.15/unit)
o Indirect Labor (S.40/unit)
Other ($.35/unit)
Production supervisors’ salaries – $6,000 per month
Depreciation – $950 per month
Other fixed – $2,000 per month
Selling and Adminitstraion costs consist of the following
Commissions ($1.10/unit sold)
Freight (S.15/unit sold)
Salaries – $8,500 per month
Rent – $800 per month
Depreciation $150 per month
LB will purchase new equipment at a cost of $10,000 on March 31, 2019 Transcribed Image Text: 5. is the expected balance in Accounts Payable on March 31, 2019 (the end of the
quarter)?
A) $1,913
B) $ 10,838
C) $ 14,033
D) $ 8,256

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