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 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 $ 9,500 56,500 53, 250 234,000 $ 353, 250 $ 79,000 20,000 180,000 74,250 $ 353, 250 The company is in the process of preparing a budget for May and has assembled the following data: a. Sales are budgeted at $299,000 for May. Of these sales, $89,700 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 $169,000 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 $42,000. d. Selling and administrative expenses for May are budgeted at $89,700, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,250 for the month. e. The note payable on the April 30 balance sheet will be paid during May, with $320 in interest. (All of the interest relates to

Answer 1

Minden company
Schedule of Expected Cash Collections
	May
Cash Sales	89,700
Cash Sales ( 299000 - 89700) / 2	1,04,650
Credit Sales	56,500
Total Cash Collections	2,50,850
Schedule of Expected Cash Disbursements
	May
May purchases (169,000 * 0.40)	67,600
April Purchases	79,000
Total Cash Disbursement for Purchases	1,46,600
Cash Budget
	May
Cash Balance Beginning	9,500
Add Cash Collections	2,50,850
Total Cash Available	2,60,350
Less Cash Disburtments:
Inventory Purchases	1,46,600
Selling and Administrative Expenses	89,700
Equipment Purchases	7200
Total Cash Disbursement	2,43,500
Excess (deficiency) of cash	16,850
Financing:
Borrowings	25200
Repayments	-20000
Interest	-320
Total Financing	4880
Cash Balance, Ending	21,730
Income Statement
For the Quarter Ended May 30
Sales	299000
Less:- COGS
Opening inventory 53250
Add:- purchases   169000
Less:- closing inventory 42000	180250
Gross Margin	118750
Selling and Administrative Expenses	89,700
Depreciation	2,250
Net Operating Income	26,800
Interest Expenses	320
Net Income	26,480
Balance Sheet
May-31
Assets
Current Assets:
Cash ( cash budget )	21,730
Accounts Receivable ( 299000 - 89700) / 2	1,04,650
Inventory ( given )	42,000
Total Current Assets	1,68,380
Buildings and Equipment, Net
234000 + 7200 - 2250	238950
Total Assets	4,07,330
Liabilities and Equity
Current Liabilities
Accounts Payable ( 169000 * 60 % )	1,01,400
Note payable	25,200
StockHolder's Equity:
Capital Stock	180000
Retained Earnings ( 74250 + 26480 )	1,00,730
Total Liabilities and Equity	4,07,330