Question

Colerain Corporation is a merchandising company that is preparing a budget for the third quarter of the calendar year. The company's balance sheet as of June 30 is shown below: COLERAIN CORPORATION Balance Sheet June 30 Assets Cash Accounts receivable Inventory Plant and equipment, net of depreciation 95,000 141,000 67,000 350,000 Total assets $ 653,000 Liabilities and Shareholders' Equity Accounts payable Common shares Retained earnings 76,000 450,000 127,000 Total liabilities and shareholders' equity $653,000 Colerain's managers have made the following additional assumptions and estimates: a. Estimated sales for July August September, and October will be $300.000 $320.000, $310.000, and $330.000, respectively. b. All sales are on credit and all credit sales are collected. Each month's credit sales are collected 25% in the month of sale and 75% in the month following the sale. All of the accounts receivable at June 30 will be collected in July C. Each month's ending inventory must equal 40% of the cost of next month's sales. The cost of goods sold is 70% of sales. The company pays for 50% of its merchandise purchases in the month of the purchase and the remaining 50% in the month following the purchase. All of the accounts payable at June 30 will be paid in July Monthly selline and ariministrative evnences are alwave 800 Fach month $90nn ofthie total amount is de reclation evnence < Prey 4 of 5 Next >

Answer 1

	Colerain Corporation
	Sales Budget
	Month	July	August	September	Quarter
	Sales	$             3,00,000.00	$   3,20,000.00	$   3,10,000.00	$     9,30,000.00
	Colerain Corporation
		Schedule of Expected cash collection
1)	Month	July	August	September	Quarter
	Accounts Receivable(As per balance sheet)	$             1,41,000.00			$     1,41,000.00
	($300000*25%) in July and ($300000*75%) in August	$                 75,000.00	$   2,25,000.00		$     3,00,000.00
	($320000*25%) in August and ($320000*75%) in September		$       80,000.00	$   2,40,000.00	$     3,20,000.00
	($310000*25%) in September			$      77,500.00	$        77,500.00
	Total Cash Collection	$             2,16,000.00	$   3,05,000.00	$   3,17,500.00	$     8,38,500.00
	Month	Sales	Cost of goods sold=(70% of Sales)
	July	$             3,00,000.00	$   2,10,000.00
	August	$             3,20,000.00	$   2,24,000.00
	September	$             3,10,000.00	$   2,17,000.00
	October	$             3,30,000.00	$   2,31,000.00
	Colerain Corporation
		Mercendise Purchase Budget
2a)	Month	July	August	September	Quarter
	Budgeted cost of goods sold=(A)	$             2,10,000.00	$   2,24,000.00	$   2,17,000.00	$     6,51,000.00
	Add: Ending Inventory=($224000*40%) in July,(217000*40%) in August,($231000*40%) in September=(B)	$                 89,600.00	$       86,800.00	$      92,400.00	$        92,400.00
	Total Needs=(C )=(A)+(B)	$             2,99,600.00	$   3,10,800.00	$   3,09,400.00	$     7,43,400.00
	Less: Beginning Inventory=(D)	$                 67,000.00	$       89,600.00	$      86,800.00	$        67,000.00
	Required Purchases=(C )-(D )	$             2,32,600.00	$   2,21,200.00	$   2,22,600.00	$     6,76,400.00
	Colerain Corporation
2b)		Schedule of Cash Disbursement for Purchases
	Month	July	August	September	Quarter
	Accounts Payable	$                 76,000.00			$        76,000.00
	($232600*50%)in July and ($232600*50%) in August	$             1,16,300.00	$   1,16,300.00		$     2,32,600.00
	($221200*50%) in August and ($221200*50%) in September		$   1,10,600.00	$   1,10,600.00	$     2,21,200.00
	($222600*50%) in September			$   1,11,300.00	$     1,11,300.00
		$             1,92,300.00	$   2,26,900.00	$   2,21,900.00	$     6,41,100.00
3)	Colerain Corporation
	Income Statement
	Sales=(A)	$             9,30,000.00
	Cost of goods sold=(B)	$             6,51,000.00
	Gross Profit=($930000-651000)=(C )=(A)-(B)	$             2,79,000.00
	Selling and Administrative Expenses=($80000*3)=(D )	$             2,40,000.00
	Net Income=(C )-(D)	$                 39,000.00
	Colerain Corporation
	Cash Balance
	Beginning Cash=(A)	$                 95,000.00
	Amount collected from customers=(B)	$             8,38,500.00
	Total Cash Available=(C )=(A)+(B)	$             9,33,500.00
	Amount paid for mecendise purchase=(D)	$             6,41,100.00
	Selling & Administerative Expenses($80000-$9000)*3=(E )	$             2,13,000.00
	Cash Balance at the Year End=(C )-(D)-(E )	$                 79,400.00
4)	Colerain Corporation
	Balance Sheet
	September 30th
	Assets
	Cash	$                 79,400.00
	Accounts Receivable($310000*75%)	$             2,32,500.00
	Inventory	$                 92,400.00
	Plant,Equipment,net=($350000-($9000*3))	$             3,23,000.00
	Total Assets	$             7,27,300.00
	Liabilities & Stockholder's Equity
	Accounts Payable($222600*50%)	$             1,11,300.00
	Common Stock(As Per Balance sheet)	$             4,50,000.00
	Retained Earnings($127000+$39000)	$             1,66,000.00
	Total Liabilities and Stockholder's Equity	$             7,27,300.00