Question

Minden Company is a wholesale distributor of premium European chocolates. The company's balance sheets of April 30 is given below April on 19. Inventory Buildings and equipment, et of depreciation Total assets Libilities and Stockholders' Equity Accounts payable wote pale stock Total l lities and steedersity The company is in the process of preparing a budget for May and has assembled the following data: Sales are budgeted at $255 000 for May of these sales, $76,500 will be for cash the reminder will be credit sales One half of 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 Apr 30 accounts receivable will be collected in Mary b. Purchases of inventory are expected to total $189.000 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 Art 30 accounts payable to suppliers will be paid during May The May 31 inventory balance is budgeted at $77500 d. Selling and administrative expenses for May are budgeted at $93.600, exclusive of depreciation. These expenses will be paid in Cash Depreciation is budgeted at $6,250 for the month e. The note payable on the Apni 30 balance sheet will be paid during May, with $370 in interest. (All of the interest relates to May) New refrigerating equipment costing 58.600 will be purchased for cash during May During May, the company will borrow $29.500 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 Mary 5. Prepare a budgeted balance sheet as of May 31

Answer 1

1 Total Cash Collections 267750 (W.N. 3.) 2 Total Cash Disbursements 265570 (W.N. 4.) Working Notes 1.) Total Cash Collections Apr 72500 May 165750 Total 238250 (89250 +76500) Refer W.N. 2 267750 May Collectible 2.) Credit Sales 178500 89250 i.e.(178500/2) =255000-76500 Apr 3.) Total Cash Collections From Sale W.N.1 72500 Note Payable 4.) Total Cash Disburseme Purchases 68000 Selling & Admin Exp Note Payable Equipment Purchase May 165750 29500 75600 93600 19770 8600 Total 238250 29500 143600 93600 19770 8600 265570 5.) Op Inventory -Cl Inventory +Purchases COGS 37500 -77500 189000 149.000

3 Cash Budget for the month of May 11100 238250 249350 143600 93600 8600 Beginning Cash Balance Add Collections from Customers Total Cash Available Less Cash Disbursements Purchase of Inventory Selling and Admin Expenses Purchases of Equipment Total Cash Disbursements Excess of Cash Available over Disb Financing Borrowing Note Repayments Note Interest Total Financing Ending Cash Balance 3550 29500 -19400 -370 9730 13280 255000 149000 W.N.5 106000 4 Budgeted Income Statement Sales Less: COGS Cost of Goods Sold Gross Profit Less: Selling & Admin Exp Depreciation Interest on Note Payable Total Expenses Net Income -93600 -6250 -370 -100220 5780

Budgeted Balance St 30 Apr 31 May Assets Cash 11100 13280 Accounts Receivable 72500 89250 Inventory 37500 77500 Buildings and Equipr 238000 240350 =(238000+8600-6250) Total Assets 359100 420380 Liablities and Stockholders' Equity Accounts Payable 68000 113400 Note Payable 19400 29500 Common Stock 180000 180000 Retained Earnings 91700 97480 =(91700+5780) 359100 420380