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	$	12,200
Accounts receivable, customers		58,000
Inventory		32,400
Buildings and equipment, net of depreciation		223,000
Total assets	$	325,600
Liabilities and Shareholders’ Equity
Accounts payable, suppliers	$	67,800
Note payable		16,100
Capital shares, no par		196,000
Retained earnings		45,700
Total liabilities and shareholders’ equity	$	325,600

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 $360,000 for May. Of these sales, $108,000 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 $216,000 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 $72,000.
d.	Operating expenses for May are budgeted at $129,600, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $3,600 for the month.
e.	The note payable on the April 30 balance sheet will be paid during May, with $120 in interest. (All of the interest relates to May.)
f.	New refrigerating equipment costing $8,100 will be purchased for cash during May.
g.	During May, the company will borrow $36,000 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.)

      

2.	Prepare a budgeted income statement for May.

       

3.	Prepare a budgeted balance sheet as of May 31.

      

Answer 1

Solutions:

108000 Minden Company Schedule of Expected Cash collection Cash Sales of May Collection of Accounts Receivable: April 30 Balance May Credit sales [(360000-108000) *1/2] Total Cash collection 58000 126000 292000 10 11 12 13 16 Minden Company chedule of Expected Cash disbursement April 30 Accounts payable balance May Purchases (216000*40%) Total Cash disbursement 67800 86400 154200 17 18 19 20 12200 292000 304200 29 Minden Company Cash Budget Beginning Cash Balance Add: Collection from customers Total cash available Less: Cash Disbursement: Purchase of Inventory Selling and administrative expenses Purchases of Equipment Total Cash disbursement Excess of cash available over disbursement Financing: Borrowing-Note Repayments-Note Interest Total Financing Ending cash Balance 154200 129600 8100 291900 12300 30 با با با با سا 36000 -16100 -120 197801 32080 38 39 Minden Company Budgeted Income Statement For the month of May Sales Less: Cost of goods sold (32400+216000-72000) Gross Margin Less: Selling and administrative expenses (129600+3600) Net Operating income Less: Interest expense Net Income 360000 176400 183600 133200 50400 48 120 49 502801 50 32080 126000 72000 Minden Company Budgeted Balance Sheet May-31 Assets Cash Accounts receivable Inventory Building and Equipment, net of Depreciation (223000-3600+8100) Total Assets Liabilities and Stockholders' Equity Accounts Payable (216000*60%) Notes payable Common stock Retained earnings (45700+50280) Total Liabilities and Stockholders' Equity 227500 457580 129600 36000 196000 95980 457580 67 -201 (2) ) Sheet332 Sheet333 ) Sheet334 Sheet335