PROBLEM 10-2. Master Budget Techlabs operates a computer training center. The following data relate to the preparation of a master budget for January of 2007. 1. At the end of 2006, the company's general ledger indicated the following balances Debits Credits Accounts payable Cash Accounts receivable Equipment (net) Total $ 40,000 $ 30,000 30,000 Note payable 50,000 100,000 Retained earnings 70,000 Common stock 20,000 $170,000 $170,000 2. Tuition revenue in December of 2006 was $60,000 and tuition revenue budgeted for January, 2007 is $70,000. 3. Fifty percent of tuition revenue is collected in the month earned and 50 percent is collected in the subsequent month. The receivable balance at the end of 2006 re- flects tuition earned in December 2006 4. Monthly expenses (excluding interest expense) are budgeted as follows: salaries. $30,000, rent, $2,000; depreciation on equipment, $5,000; utilities, $500, other. $1,000.

5. Expenses are paid in the month incurred. Purchases of equipment are paid in the month after purchase. The $30,000 payable at the end of 2006 represents money owed for the purchase of computer equipment in December 2006.
6. The company intends to purchase $20,000 of computer equipment in January of 2007. The anticipated $5,000 per month of depreciation (see number 4) reflects the addition of $800 of monthly depreciation related to this purchase.
7. The note is at 10 percent per annum and requires monthly interest payments of $417. The payments are made on the 20th of each month. The principal must be paid in February of 2008.
8. The tax rate is 35 percent.

Required Complete the following budgets:
Part A.
Budgeted Cash Receipts and Disbursements For January 2007 Cash receipts Collection of December 2006 tuition Collection of January 2005 tuition Total cash receipts Cash disbursements Payment of salaries Payment of rent Payment of utilities Payment of other expenses Payment for purchases of computer equipment Payment of interest on note Payment of taxes Total disbursements Plus beginning cash balance Ending cash balance PartB.
Budget Income Statement For January 2007 Tuition revenue Less:
Salaries Rent Utilities Depreciation Other Interest expense Total expense Income before taxes Taxes on income Net income PartC.
Budgeted Balance Sheet As of January 30, 2007 Assets Cash Accounts receivable Equipment (net)
Total assets $_ Liabilities Accounts payable $
Note payable _ Total liabilities _ Owner equity Retained earnings Common stock _ Total owner's equity _ Total liabilities and owner's equity