Question

Minden Company is a wholesale distributor of premium European chocolates. The company's balance sheet on April 30 is as follows: MINDEN COMPANY Balance Sheet April 30 Assets Cash Accounts receivable, customers Inventory Buildings and equipment, net of depreciation $ 15,400 62.000 34,800 239,000 Total assets $351,200 Liabilities and Shareholders' Equity Accounts payable, suppliers $ 72,600 Note payable 17,700 Capital shares, no par 212,000 Retained earnings 48.900 Total liabilities and shareholders' equity $351.200 The company is in the process of preparing budget data for May. A number of budget items have already been prepared, as follows: a. Sales are budgeted at $520,000 for May. Of these sales, $156,000 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 are collected in the following month. All of the April 30 receivables will be collected in May. b. Purchases of inventory are expected to total $312,000 during May. These purchases will all be on account. 40% 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 $104,000. d. Operating expenses for May are budgeted at $187,200, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $5,200 for the month. e. The note payable on the April 30 balance sheet will be paid during May, with $100 in interest. (All of the interest relates to May.) f. New refrigerating equipment costing $9,700 will be purchased for cash during May. g. During May, the company will borrow $52,000 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. Prepare a cash budget for May (Any "Repayments" and "Interest" should be indicated by a minus sign.)

Answer 1

Solution:

Minden Company
Schedule of Expected Cash collection
Cash Sales of May	156000
Collection of Accounts Receivable:
April 30 Balance	62000
May Credit sales [(520000-156000)*1/2]	182000
Total Cash collection	400000
Minden Company
Schedule of Expected Cash disbursement
April 30 Accounts payable balance	72600
May Purchases (312000*40%)	124800
Total Cash disbursement	197400
Minden Company
Cash Budget
Beginning Cash Balance	15400
Add: Collection from customers	400000
Total cash available	415400
Less: Cash Disbursement:
Purchase of Inventory	197400
Selling and administrative expenses	187200
Purchases of Equipment	9700
Total Cash disbursement	394300
Excess of cash available over disbursement	21100
Financing:
Borrowing-Note	52000
Repayments-Note	-17700
Interest	-100
Total Financing	34200
Ending cash Balance	55300
Minden Company
Budgeted Income Statement
For the month of May
Sales	520000
Less: Cost of goods sold (34800+312000-104000)	242800
Gross Margin	277200
Less: Selling and administrative expenses (187200+5200)	192400
Net Operating income	84800
Less: Interest expense	100
Net Income	84700
Minden Company
Budgeted Balance Sheet
May-31
Assets
Cash	55300
Accounts receivable	182000
Inventory	104000
Building and Equipment, net of Depreciation (239000-5200+9700)	243500
Total Assets	584800
Liabilities and Stockholders' Equity
Accounts Payable (312000*60%)	187200
Notes payable	52000
Common stock	212000
Retained earnings (48900+84700)	133600
Total Liabilities and Stockholders' Equity	584800