Question

TB Problem Qu. 8-224 Weller Industrial Gas Corporation ... Weller industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow. • Sales are budgeted at $340,000 for November. $360,000 for December, and $350,000 for January • Collections are expected to be 75% in the month of sale and 25% in the month following the sale. • The cost of goods sold is 68% of sales. • The company desires an ending merchandise Inventory equal to 80% of the cost of goods sold in the following month • Payment for merchandise is made in the month following the purchase • Other monthly expenses to be paid in cash are $22.200. • Monthly depreciation is $22.000. • ignore taxes. Balance sheet October 31 Assets Cash Accounts receivable Merchandise inventory Property, plant and equipment (net of $604,000 accumulated depreciation) Total assets $ 23,000 84.000 184,960 1,014,000 $1,305,960 Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings Total liabilities and stockholders' equity $ 197.000 940,000 168,960 $1,305.960 Required: a. Prepare a Schedule of Expected Cash Collections for November and December b. Prepare a Merchandise Purchases Budget for November and December C. Prepare Cash Budgets for November and December d. Prepare Budgeted Income Statements for November and December e. Prepare a Budgeted Balance Sheet for the end of December

Answer 1

Sales Budget
	November	December
Sales	340000	360000
Schedule of Expected Cash Collections
	November	December
Cash Sales	2,55,000	2,70,000
Credit Sales	84,000	85,000
Total Cash Collections	3,39,000	3,55,000
Merchandise Purchases Budget
	November	December
Budget Cost of Goods Sold	2,31,200	2,44,800
Add Desired Ending Inventory	195840	190400
Total Needs	4,27,040	4,35,200
Less Beginning Inventory	1,84,960	195840
Required Purchases	2,42,080	2,39,360
January Sales× 68% cost Ratio× 80% = $190400
Schedule of Expected Cash Disbursements
	November	December
October purchases	1,97,000
November purchases		2,42,080
December purchases
Total Cash Disbursement for Purchases	1,97,000	2,42,080
Cash Budget
	November	December
Cash Balance Beginning	23,000	1,42,800
Add Cash Collections	3,39,000	3,55,000
Total Cash Available	3,62,000	4,97,800
Less Cash Disburtments:
Inventory Purchases	1,97,000	2,42,080
Expenses	22,200	22,200
Total Cash Disbursement	2,19,200	2,64,280
Excess (deficiency) of cash	1,42,800	2,33,520
Financing:
Borrowings
Repayments
Interest
Total Financing	0
Cash Balance, Ending	1,42,800	2,33,520
Income tax expense
Welnor Industrial gas corporation
Income Statement
		November		December
Sales		3,40,000		360000
Cost Of Goods Sold:
Beginning Inventory	1,84,960		1,95,840
Add Purchase	2,42,080		2,39,360
Goods Available for Sale	4,27,040		4,35,200
Ending Inventory	1,95,840	2,31,200	190400	2,44,800
Gross Margin		1,08,800		1,15,200
Less:- expenses	22,200		22,200
Depreciation	22,000		22000
Other Expenses
		44,200		44,200
Net Operating Income		64,600		71,000
Balance Sheet
Dec-31
Assets
Current Assets:
Cash		2,33,520
Accounts Receivable ( 360000 * 0.25 )		90,000
Inventory		1,90,400
Total Current Assets		5,13,920
Buildings and Equipment, Net
1014000 - 22000-22000		9,70,000
Total Assets		14,83,920
Liabilities and Equity
Current Liabilities
Accounts Payable		239360
StockHolder's Equity:
Capital Stock	940000
Retained Earnings ( 168960 + 64600 + 71000)	3,04,560	12,44,560
Total Liabilities and Equity		14,83,920