Question

Minden Company is a wholesale distributor of premium European chocolates. The company's balance sheet as of April 30 is given below: Minden Company Balance Sheet April 30 Assets 9,400 78,500 44,000 221,000 $ 352,900 $ Cash Accounts receivable Inventory Buildings and equipment, net of depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Note payable $ 72,000 19,700 180,000 81,200 Common stock Retained earnings $ 352,900 Total liabilities and stockholders' equity The company is in the process of preparing a budget for May and has assembled the following data:

Answer 1

SOLUTION

1. Schedule of expected cash collections

Cash sales-May	76,800
Collections on account receivable:
April 30 balance	78,500
May sales [(256,000-76,800) / 2]	89,600
Total cash receipts	244,900

2. Schedule of expected cash disbursements

April 30 accounts payable balance	72,000
May Purchases (188,000*40%)	75,200
Total cash Payments	147,200

3. Cash budget

Beginning cash balance	9,400
Add: Collections from customers	244,900
Total cash available (A)	254,300
Less: Cash disbursement
Purchase of inventory	147,200
Selling and administration expense	91,500
Purchase of equipment	7,000
Total cash disbursement (B)	245,700
Excess of cash available over disbursements (A-B)	8,600
Financing:
Borrowing-note	23,100
Repayments-note	(19,700)
Interest	(435)
Total financing	2,965
Ending cash balance	11,565

4. Income statement

Sales		256,000
Less: Cost of goods sold
Beginning inventory	44,000
Purchases	188,000
Goods available for sale	232,000
Ending inventory	83,000
Cost of goods sold		149,000
Gross margin		107,000
Selling and administration expenses (91,500+4,000)		95,500
Net operating income		11,500
Interest expense		435
Net income		11,065

5. Balance sheet

Assets
Cash	11,565
Accounts receivable [(256,000-76,800) / 2]	89,600
Inventory	83,000
Buildings and equipment,net of depreciation (221,000+7,000-4,000)	224,000
Total assets	408,165
Liabilities and stockholder's equity
Accounts payable (188,000*60%)	112,800
Note payable	23,100
Common stock	180,000
Retained earnings (81,200+11,065)	92,265
Total liabilities and stockholder's equity	408,165