Question

Sipped Wheeling Company is a merchandiser that provided a balance sheet as of September 30 as shown below. Wheeling Company Balance Sheet September 30 Assets Cash $ 61,000 Accounts receivable 170 000 Inventory 86,400 Buildings and equipment, net of depreciation 249.000 Total assets $566,400 Liabilities and Stockholders' Equity Accounts payable $ 217900 Common stock 216000 Retained earnings 132.500 Total liabilities and stockholders' equity $566,400 ebook The company is in the process of preparing a budget for October and has assembled the following data 1. Sales are budgeted at $640,000 for October and $650,000 for November of these sales, 35% will be for cash the remainder will be credit sales. Forty percent of a month's credit sales are collected in the month the sales are made, and the remaining 60% is collected in the following month. All of the September 30 accounts receivable will be collected in October 2. The budgeted cost of goods sold is always 45% of sales and the ending merchandise inventory is always 30% of the following month's cost of goods sold 3. All merchandise purchases are on account. Thirty percent of all purchases are paid for in the month of purchase and 70% are paid for in the following month. All of the September 30 accounts payable to suppliers will be paid during October 4. Selling and administrative expenses for October are budgeted at $96,600, exclusive of depreciation. These expenses will be paid in cash Depreciation is budgeted at $2.490 for the month

Answer 1

Required Budgets are as calculated below:

Particulars	Amount ($)
Cash collections in October
Account Receivable (September)	170,000
Cash Sales of October (35% of 640,000)	224,000
Credit Sales of October (640,000*.65*.5)	208,000
Total cash collections	602,000
Particulars	Amount ($)
Cost of goods sold (45% of 640,000)	288,000
Add: Closing inventory (10%*45%*650,000)	29,250
Less: Beginning inventory (288,000*.10)	-86,400
Merchandise Purchase	230,850
Particulars	Amount ($)
Cash payments in October
Accounts Payable (September)	217,900
October purchases (230,850*.2)	46,170
Total cash disbursement	264,070
Income Statement
Particulars	Amount ($)
Sales	640,000
Less: Cost of goods sold	288,000
Gross profit	352,000
Less: expenses
Depreciation expense	2,490
Selling and administration exp	18,340
Net operating income	331,170

Wheeling Company
Budgeted balance Sheet
Oct-31
Assets
Cash (61,000+602,000-264,070-18,340)	380,590
Accounts Receivable (640,000*.65*.5)	208,000
Inventory	29,250
Building and equipment Net of accumulated dep	246,510
Total assets	864,350
Liabilities and Stockholders' Equity
Accounts Payable (230,850*.8)	184,680
Common Stock	216,000
Retained earnings (132,500+331,170)	463,670
Total liabilities and stockholders' equity	864,350