Question

Minden Company is a wholesale distributor of premium European chocolates. The company's balance sheet as of April 30 is given below: Minden Company Balance Sheet April 30 Assets Cash 14,600 55,000 43,500 223,000 Accounts receivable Inventory Buildings and equipment, net of depreciation Total assets $336,100 Liabilities and Stockholders' Equity Accounts payable Note payable Common stock Retained earnings 74,500 15,000 180,000 66,600 $336,100 Total liabilities and stockholders' equity The company is in the process of preparing a budget for May and has assembled the following data: a. Sales are budgeted at $244,000 for May. Of these sales, $73,200 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 is collected in the following month. All of the April 30 accounts receivable will be collected in May. b. Purchases of inventory are expected to total $130,000 during May. These purchaset 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 April 30 accounts payable to suppliers will be paid during May. C. The May 31 inventory balance is budgeted at $40,500. d. Selling and administrative expenses for May are budgeted at $84,300, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $3,950 for the month. e. The note payable on the April 30 balance sheet will be paid during May, with $430 in interest. (All of the interest relates to May.) f. New refrigerating equipment costing $7,800 will be purchased for cash during May. g. During May, the company will borrow $20,700 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-a)	Schedule of Expected cash collection
	Cash sales-May					73,200
	Collections on account receivable
	April 30 balance					55,000
	May sales		(244000-73200)*50%			85400
	total cash recepits					213,600
	Schedule of Expected cash disbursements
	April 30 accounts payable balance					74,500
	May purchases		(130000*40%)			52000
	total cash payments					126,500
1-b)	Cash Budget
	Beginning cash balance					14,600
	Add Collections from customers					213,600
	total cash available					228,200
	less Cash disbursements
	purchase of inventoru					126,500
	selling and administrative expense					84,300
	purchase of Equipment					7,800
	total cash disbursements					218,600
	Excess of cash available over disbursements					9,600
	financing:
	borrowing -note					20,700
	Repayments-note					-15,000
	interest					-430
	total financing					5,270
	Ending cash balance					14,870
	Budgeted income statement
	sales					244,000
	cost of goods sold:
	beginning inventory				43,500
	purchases				130,000
	goods available for sale				173,500
	ending invnetory				40,500
	cost of goods sold:					133,000
	Gross margin					111,000
	Selling and administrative expesne					88,250
	net operating income					22,750
	interest expesne					430
	net income					22,320
	Budgeted balance sheet
	Assets
	Cash					14,870
	Account receivable					85400
	inventory					40,500
	buildings & equipment,net of depreciaiton					226850
	total Assets					367,620
	Laibilities & stockholder's Equity
	Accounts payable					78000
	note payable					20,700
	common stock					180,000
	Retained earnings					88,920
	total liabilities & stockholders equity					367620