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 Accounts receivable Inventory Buildings and equipment, net of depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings Total liabilities and stockholders' equity $ 69,400 166,000 83,700 257,000 $ 576,100 $ 246,600 216,000 113,500 $ 576,100 The company is in the process of preparing a budget for October and has assembled the following data: 1. Sales are budgeted at $620,000 for October and $630,000 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 $83,800, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,570 for the month.

Answer 1

a
Budgeted cash collection
A
Budgeted Sales	620000
Cash Sales-35%	217000
Accounts Receivable	166000
Credit sales collection ($620,000*65%*50%)	201500
Total Collections	584500
B
Budgeted sales	620000
Cost of goods sold(45%*sales)	279000
Add:Ending Inventory (630000*45%*10%)	28350
Total Needs	307350
Less:Opening inventory	-83700
Total Purchases	223650
C)Cash Disbursements
Purchases: 223,650*20%	44730
Accounts Payable-September	246600
Selling and administrative Expenses	83800
Total Disbursements	375130
D)Income Statement
Sales	620000
Less: Cost of goods sold (45%*620000)	279000
Gross Profit	341000
Less:Operating Expenses
Selling and administrative Expenses	83800
Depreciation	2570
Net Income	254630
E.Balance sheet
Assets
Cash 69400+584500-375130	278770
Accounts receivable $620,000*65%*50%	201500
Inventory	28350
Buildings and Equipment ,net of depreciation 257000-2570	254430
total assets	763050
Liabilities & Stockholder's Equity
Accounts Payable 223650*80%	178920
Common stock	216000
Retained Earnings 113500+254630	368130
Total Liabilities and Stockholder's equity	763050