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.

Answer 1

1.

Minden Company
Cash Budget
For the Month Ended May 31
Cash balance, beginning	15400
Add: Receipts from customers	400000
Total cash available	415400
Deduct: Disbursements:
Purchases of inventory	197400
Operating expenses	187200
Purchases of equipment	9700
Total cash disbursements	394300
Excess of receipts over disbursements	21100
Financing:
Borrowings-note	52000
Repayment-note	-17700
Interest	-100
Total financing	34200
Cash balance, ending	55300

Working:

Expected Cash Collections
Cash sales - May	156000
Collections on account receivable:
April 30 balance	62000
May sales [($520000-$156000) x 50%]	182000
Total cash collections	400000
Expected Cash Disbursements for Inventory Purchases
April 30 accounts payable balance	72600
May purchases ($312000 x 40%)	124800
Total cash disbursements	197400

2.

Minden Company
Budgeted Income Statement
For the Month Ended May 31
Sales		520000
Cost of goods sold:	242800
Beginning inventory	34800
Add: Purchases	312000
Goods available for sale	346800
Deduct: Ending inventory	104000
Cost of goods sold		242800
Gross margin		277200
Operating expenses ($187200 + $5200)		192400
Net operating income		84800
Interest expense		100
Net income $		84700

3.

Minden Company
Budgeted Balance Sheet
as of May 31
Assets
Cash	55300
Accounts receivable, customers	182000
Inventory	104000
Buildings and equipment, net of depreciation	243500
($239000 + $9700 - $5200)
Total assets $	584800
Liabilities and Shareholders' Equity
Accounts payable, suppliers ($312000 x 60%)	187200
Note payable	52000
Capital shares, no par	212000
Retained earnings ($48900 + $84700)	133600
Total liabilities and stockholders' equity $	584800