Question

Weller Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow • Sales are budgeted at $300,000 for November, $320,000 for December, and $310,000 for January • Collections are expected to be 75% in the month of sale and 25% in the month following the sale. • The cost of goods sold is 76% of sales. • The company desires an ending merchandise inventory equal to 80% of the cost of goods sold in the following month • Payment for merchandise is made in the month following the purchase, • Other monthly expenses to be paid in cash are $20,600. • Monthly depreciation is $20,400. Ignore taxes. Balance Sheet October 31 Assets Cash Accounts receivable Merchandise inventory Property, plant and equipment (net of $590,000 accumulated depreciation) Total assets $ 21,400 82,480 182,480 1, eee, eee $1,286,280 Liabilities and Stockholders' Equity ALERT- hl < Prev 4 of 5 !!! Next >

can you please show me how to arrive at these numbers. the explanation. thanks

Answer 1

A) Prepare a Schedule of Expected cash collections for November and December :

	NOVEMBER	DECEMBER
Sales	$ 300,000	$ 320,000
Schedule of Expected Cash Collections :
Accounts Receivable	$ 82,400
November Sales	$ 225,000 {300,000*75%}	$ 75,000 {300,000*25%}
December Sales		$ 240,000 {320,000*75%}
Total Cash collections	$ 307,400	$ 315,000

B) Prepare a Merchandise purchases Budget for November and December :
	NOVEMBER	DECEMBER
Budgeted cost of goods sold	$ 228,000      {$300,000*76%}	$ 243,200      {$320,000*76%}
Add: Desired ending merchandising inventory	$ 194,560     {$320,000*76%*80% }	$ 188,480    {$310,000*76%*80% }
Total needs	$ 422,560	$ 431,680
less: Beginning merchandise inventory	($ 182,400)   {$300,000*76%*80% }	($194,560)     {$320,000*76%*80% }
Required purchase	$ 240,160	$ 237,120

C) Prepare Cash Budgets for November and December :
	NOVEMBER	DECEMBER
Cash disbursements for merchandise	$ 195,400 (given in balance sheet)	$ 240,160 ( see required B)
other monthly cash expense	$ 20,600	$ 20,600
Total cash disbursements	$ 216,000	$ 260,760
Beginning cash balance	$ 21,400 (given in balance sheet)	$ 112,800
Add: cash receipts	$ 307,400 ( see required A)	$ 315,000 ( see required A)
Total cash available	$ 328,800	$ 427,800
less: Cash Disbursements	($ 216,000) ( see above calculation )	($ 260,760) ( see above calculation )
Excess (deficiency) of cash available over disbursements	$ 112,800	$ 167,040
Financing	$ 0	$ 0
Ending cash balance	$ 112,800	$ 167,040

D) Prepared Budgeted Income Statements for November and December :
	NOVEMBER	DECEMBER
Sales	$ 300,000	$ 320,000
Less: Cost of goods sold	($ 228,000 )     {$300,000*76%}	($ 243,200)      {$320,000*76%}
Gross margin	$ 72,000	$ 76,800
less: other monthly expenses	( $ 20,600)               (Given)	( $ 20,600)               (Given)
Less: Depreciation .	( $ 20,400)               (Given)	( $ 20,400)               (Given)
Net operating income	$ 31,000	$ 35,800

E) Prepared a Budgeted Balance Sheet for end of December :
Balance Sheet
December 31
Assets :
Cash	$ 167,040 ( See Required C )
Accounts Receivable	$ 80,000    {$320,000 * 25%}
Inventory	$ 188,480    {$310,000*76%*80% }
Property, Plant and equipment(net of accumulated depreciation )	$ 959,200 {$1000,000 - ($20,400*2 months)
Total assets	$ 1,394,720
Liabilities and Stockholders' equity
Accounts payable	$ 237,120                  ( see required B)
Common stock	$ 550,000   (Given in previous balance sheet)
Retained earnings	$ 607,600 {$540,800+31000+35800}
Total Liabilities and Stockholders' equity	$ 1,394,720