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Minden Company is a wholesale distributor of premium European chocolates. The company’s balance sheet as of...

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
Cash $ 18,700
Accounts receivable 70,250
Inventory 41,250
Buildings and equipment, net of depreciation 230,000
Total assets $ 360,200
Liabilities and Stockholders’ Equity
Accounts payable $ 72,250
Note payable 13,700
Common stock 180,000
Retained earnings 94,250
Total liabilities and stockholders’ equity $ 360,200

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

  1. Sales are budgeted at $214,000 for May. Of these sales, $64,200 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.

  2. Purchases of inventory are expected to total $122,000 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.

  3. The May 31 inventory balance is budgeted at $47,500.

  4. Selling and administrative expenses for May are budgeted at $85,500, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,050 for the month.

  5. The note payable on the April 30 balance sheet will be paid during May, with $390 in interest. (All of the interest relates to May.)

  6. New refrigerating equipment costing $16,300 will be purchased for cash during May.

  7. During May, the company will borrow $24,500 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.

Required:

1. Calculate the expected cash collections for May.

2. Calculate the expected cash disbursements for merchandise purchases for May.

3. Prepare a cash budget for May.

4. Prepare a budgeted income statement for May.

5. Prepare a budgeted balance sheet as of May 31.

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Answer #1
1-a) Schedule of Expected cash collection
Cash sales-May 64,200
Collections on account receivable
April 30 balance 70,250
May sales (214000-64200)*50% 74900
total cash recepits 209,350
Schedule of Expected cash disbursements
April 30 accounts payable balance 72,250
May purchases (122000*40%) 48800
total cash payments 121,050
1-b)                          Cash Budget                                                     
Beginning cash balance 18,700
Add Collections from customers 209,350
total cash available 228,050
less Cash disbursements
purchase of inventoru 121,050
selling and administrative expense 85,500
purchase of Equipment 16,300
total cash disbursements 222,850
Excess of cash available over disbursements 5,200
financing:
borrowing -note 24,500
Repayments-note -13,700
interest -390
total financing 10,410
Ending cash balance 15,610
Budgeted income statement
sales 214,000
cost of goods sold:
beginning inventory 41,250
purchases 122,000
goods available for sale 163,250
ending invnetory 47,500
cost of goods sold: 115,750
Gross margin 98,250
Selling and administrative expesne 87,550
net operating income 10,700
interest expesne 390
net income 10,310
Budgeted balance sheet
Assets
Cash 15,610
Account receivable 74900
inventory 47,500
buildings & equipment,net of depreciaiton 244250
total Assets 382,260
Laibilities & stockholder's Equity
Accounts payable 73200
note payable 24,500
common stock 180,000
Retained earnings 104,560
total liabilities & stockholders equity 382260
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