Question

Wheeling Company is a merchandiser that provided a balance sheet as of September 30 as shown below:

Wheeling Company Balance Sheet September 30
Assets
Cash	$	77,800
Accounts receivable		134,000
Inventory		62,100
Buildings and equipment, net of depreciation		284,000
Total assets	$	557,900
Liabilities and Stockholders’ Equity
Accounts payable	$	225,900
Common stock		216,000
Retained earnings		116,000
Total liabilities and stockholders’ equity	$	557,900

The company is in the process of preparing a budget for October and has assembled the following data:

1. Sales are budgeted at $460,000 for October and $470,000 for November. Of these sales, 35% will be for cash; the remainder will be credit sales. Forty percent of a month’s credit sales are collected in the month the sales are made, and the remaining 60% is collected in the following month. All of the September 30 accounts receivable will be collected in October.

2. The budgeted cost of goods sold is always 45% of sales and the ending merchandise inventory is always 30% of the following month’s cost of goods sold.

3. All merchandise purchases are on account. Thirty percent of all purchases are paid for in the month of purchase and 70% are paid for in the following month. All of the September 30 accounts payable to suppliers will be paid during October.

4. Selling and administrative expenses for October are budgeted at $81,400, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,840 for the month.

1. Using the information provided, calculate or prepare the following:

a. The budgeted cash collections for October.

b. The budgeted merchandise purchases for October.

c. The budgeted cash disbursements for merchandise purchases for October.

d. The budgeted net operating income for October.

e. A budgeted balance sheet at October 31.

The company is in the process of preparing a budget for October and has assembled the following data: 1. Sales are budgeted at $460,000 for October and $470,000 for November. Of these sales, 35% will be for cash; the remainder will be credit sales. Forty percent of a month's credit sales are collected in the month the sales are made, and the remaining 60% is collected in the following month. All of the September 30 accounts receivable will be collected in October. 2. The budgeted cost of goods sold is always 45% of sales and the ending merchandise inventory is always 30% of the following month's cost of goods sold. 3. All merchandise purchases are on account. Thirty percent of all purchases are paid for in the month of purchase and 70% are paid for in the following month. All of the September 30 accounts payable to suppliers will be paid during October 4. Selling and administrative expenses for October are budgeted at $81,400, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,840 for the month. Required: 1. Using the information provided, calculate or prepare the following: a. The budgeted cash collections for October. b. The budgeted merchandise purchases for October c. The budgeted cash disbursements for merchandise purchases for October d. The budgeted net operating income for October. e. A budgeted balance sheet at October 31. 2. Assume the following changes to the underlying budgeting assumptions: (1) 50% of a month's credit sales are collected in the month the sales are made and the remaining 50% is collected in the following month, (2) the ending merchandise inventory is always 10% of the following month's cost of goods sold, and (3) 20% of all purchases are paid for in the month of purchase and 80% are paid for in the following month. Using these new assumptions, calculate or prepare the following: a. The budgeted cash collections for October. b. The budgeted merchandise purchases for October c. The budgeted cash disbursements for merchandise purchases for October d. Net operating income for the month of October. e. A budgeted balance sheet at October 31. Complete this question by entering your answers in the tabs below.

2. Assume the following changes to the underlying budgeting assumptions:

(1) 50% of a month’s credit sales are collected in the month the sales are made and the remaining 50% is collected in the following month, (2) the ending merchandise inventory is always 10% of the following month’s cost of goods sold, and (3) 20% of all purchases are paid for in the month of purchase and 80% are paid for in the following month. Using these new assumptions, calculate or prepare the following:

a. The budgeted cash collections for October.

b. The budgeted merchandise purchases for October.

c. The budgeted cash disbursements for merchandise purchases for October.

d. Net operating income for the month of October.

e. A budgeted balance sheet at October 31.

1. a. Budgeted cash collections for October: $ 414,600

Cash Sales ( $ 460,000 x 35 % )	$ 161,000
Collection of October credit sales	119,600
Collection of September credit sales	134,000
Total cash collections	$ 414,600

b. Budgeted merchandise purchases for October: $ 208,350

Budgeted Cost of Goods Sold ( $ 460,000 x 45 % )	$ 207,000
Add: Desired Ending Inventory ( $ 470,000 x 45 % x 30 % )	63,450
Total Inventory Needed	270,450
Less: Beginning Inventory	(62,100)
Budgeted Merchandise Purchases	$ 208,350

c. Budgeted cash disbursements for merchandise purchases for October : $ 225,900 + $ 208,350 x 30 % = $ 288,405

d.

Wheeling Company Budgeted Income Statement For the month ending October 31
Sales		$ 460,000
Less: Cost of Goods Sold
Beginning Inventory	62,100
Add: Merchandise Purchases	208,350
Less: Ending Inventory	(63,450)	207,000
Gross Profit		253,000
Selling and Administrative Expenses		84,240
Net Operating Income		$ 168,760

e.

Wheeling Company Budgeted Balance Sheet October 31
ASSETS
Cash	$ 122,595
Accounts Receivable	179,400
Inventory	63,450
Buildings and Equipment, net of depreciation	281,160
Total Assets	$ 646,605
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts Payable	145,845
Common Stock	216,000
Retained Earnings	284,760
Total Liabilities and Stockholders' Equity	$ 646,605

asking for question 2

Answer 1

Calculation Oct Oct 460,000 Wheeling Company Schedule of budgeted cash collections Rega Sales Cash collections Cash sales Credit sales collections Accounts Receivable Oct sales Total cash collections 161,000 =460,000*35% 134,000 149,500 444,500 =460,000*65%*50% Merchandise Purchase budget Reqb Budgeted Cost of goods sold Add Desired Ending Inventory Total Needs Less Beginning Inventory Required Purchases Oct =460,000*45% =470,000*45%*10% Oct 207,000 21,150 228,150 62,100 166,050 Schedule of budgeted cash disbursements-Purchases Reqc Accounts Payables Oct Purchases Total disbursements for pur Oct 225,900 33,210 259,110 =166,050*20% Income Statement Reqd Sales Cost of goods sold Gross Profit Operating expenses Depreciation Net Operating Income Oct 460,000 207,000 253,000 81,400 2,840 168,760 Balance Sheet Rege Assets Cash Accounts Receivable Inventory Buildings & Equipment, net of Depreciation Total Assets 181,790 149,500 21,150 281,160 633,600 From Cash budget below =460,000*65%*50% From Reqb = 284,000-2,840 =166,050*80% Liabilities & Equity Accounts Payable Common Stock Retained Earnings Total Liabilities & Equity 132,840 216,000 284,760 633,600 =116,000+168,760 Oct 77,800 444,500 522,300 Cash budget Workings Cash balance, beginning Add Cash collections Total cash available Less cash disbursements For Inventory For expenses Total Cash disbursements Cash balance, ending 259,110 81,400 340,510 181,790