Question

I n Londity is d WIOS USUIDULUI UI piel Europedil CIOCUldus. company Udidlice Seed Ul Apil JUIS Viven below: Minden Company Balance Sheet April 30 Assets Cash Accounts receivable Inventory Buildings and equipment, net of depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Note payable Common stock Retained earnings Total liabilities and stockholders' equity $ 10,300 70,000 43,000 227,880 $ 350, 380 $ 86,000 23,000 180,000 61,300 350, 380 $ The company is in the process of preparing a budget for May and has assembled the following data: a. Sales are budgeted at $276.000 for May. Of these sales, $82,800 will be for cash; the remainder will be credit sales. One-half of a month's credit sales are collected in the month the sales are made, and the remainder is collected in the following month. All of the April 30 accounts receivable will be collected in May. b. Purchases of inventory are expected to total $147,000 during May. These purchases will all be on account. Forty percent of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the April 30 accounts payable to suppliers will be paid during May c. The May 31 inventory balance is budgeted at $43,000. d. Selling and administrative expenses for May are budgeted at $97,500, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $3,200 for the month. e. The note payable on the April 30 balance sheet will be paid during May, with $235 in interest. (All of the interest relates to May.) 1. New refrigerating equipment costing $12,100 will be purchased for cash during May g. During May, the company will borrow $29,200 from its bank by giving a new note payable to the bank for that amount. The new < Prev 3 of 4 !!! Next > arch

Answer 1

SOLUTION

1. Schedule of expected cash collections

Cash sales-May	82,800
Collections on account receivable:
April 30 balance	70,000
May sales [(276,000-82,800) / 2]	96,600
Total cash receipts	249,400

2. Schedule of expected cash disbursements

April 30 accounts payable balance	86,000
May Purchases (147,000*40%)	58,800
Total cash Payments	144,800

3. Cash budget

Beginning cash balance	10,300
Add: Collections from customers	249,400
Total cash available (A)	259,700
Less: Cash disbursement
Purchase of inventory	144,800
Selling and administration expense	97,500
Purchase of equipment	12,100
Total cash disbursement (B)	254,400
Excess of cash available over disbursements (A-B)	5,300
Financing:
Borrowing-note	29,200
Repayments-note	(23,000)
Interest	(235)
Total financing	5,965
Ending cash balance	11,265

4. Income statement

Sales		276,000
Less: Cost of goods sold
Beginning inventory	43,000
Purchases	147,000
Goods available for sale	190,000
Ending inventory	(43,000)
Cost of goods sold		147,000
Gross margin		129,000
Selling and administration expenses (97,500+3,200)		100,700
Net operating income		28,300
Interest expense		235
Net income		28,065

5. Balance sheet

Assets
Cash	11,265
Accounts receivable [(276,000-82,800) / 2]	96,600
Inventory	43,000
Buildings and equipment,net of depreciation (227,000+12,100-3,200)	235,900
Total assets	386,765
Liabilities and stockholder's equity
Accounts payable (147,000*60%)	88,200
Note payable	29,200
Common stock	180,000
Retained earnings (61,300+28,065)	89,365
Total liabilities and stockholder's equity	386,765