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 11,500 64,750 47,000 Cash Accounts receivable Inventory Buildings and equipment, net of depreciation 220,000 $ 343,250 Total assets Liabilities and Stockho lders ' Equity Accounts payable Note payable $ 70,750 19,900 180,000 72,600 Common stock Retained earnings Total liabilities and stockholders' equity $343,250 The company is in the process of preparing a budget for May and has assembled the following data: a. Sales are budgeted at $290,000 for May. Of these sales, $87,000 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 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 $210,000 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 $79,500. d. Selling and administrative expenses for May are budgeted at $96,300, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $5,800 for the month. e. The note payable on the April 30 balance sheet will be paid during May, with $450 in interest. (All of the interest relates to May.) f. New refrigerating equipment costing $7,600 will be purchased for cash during May. g.During May, the company will borrow $23,700 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

Answer 1

1) Expected cash collections for May:
April	64750
May Cash Sales	87000
May	101500	(290000-87000)/2
Total collections	253250
2) Expected cash disbursements for merchandise purchases for May:
April	70750
May	84000	210000*40%
Total disbursements	154750
3) Cash Budget for May:
Opening Cash	11500
add:collections	253250
add:borrowings	23700
Total Cash available	288450
Less:Disbursements:
Purchases	154750
selling & admin	96300
Note payable	19900
Interest	450
equipment	7600
Total disbursements	279000
Closing Cash	9450

4) Income Statement for May:
	Amount $
Sales	290000
Less: COGS:
Op. stock	47000
add:purchases	210000
less:Cl. Stock	-79500
COGS	177500
Gross Profit	112500
Less:Expenses:
Selling&Admin	96300
Depreciation	5800
Interest	450
Total expenses	102550
Net income	9950
5) Balance Sheet as on May 31:
	Amount $
Assets:
Cash	9450
AR	101500
Inve.	79500
Building & Equipment, net	221800	(220000+7600-5800)
Total Assets	412250
Liabilities & Stockholders' Equity:	Amount $
AP	126000	210000*60%
NP	23700
CS	180000
RE	82550	72600+9950
Total Liabilities & Shareholders' equity	412250