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 Accounts receivable Inventory Buildings and equipment, net of depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Note payable Common stock Retained earnings Total liabilities and stockholders' equity 9,000 54,000 38,00 207,000 300.000 $ $ 63,00 14,500 180.000 42,500 300,000 $ The company is in the process of preparing a budget for May and has assembled the following data: a. Sales are budgeted at $220,000 for May. Of these sales, $60,000 will be for cash the remainder will be credit sales. Each month's credit sales are collected 60% in the month of sale and 40% in the month following the sale. All of the April 30 accounts receivable will be collected in May. b. Purchases of inventory are expected to total $120,000 during May. These purchases will all be on account. The company pays for 50% of its merchandise purchases in the month of the purchase and the remaining 50% in the month following the purchase. All of the April 30 accounts payable to suppliers will be paid during May c. The May 31 inventory balance is budgeted at $40,000 d. Selling and administrative expenses for May are budgeted at $72.000, exclusive of depreciation. These expenses will be paid in Cash Depreciation is budgeted at $2.000 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) New refrigerating equipment costing $6,500 will be purchased for cash during May g. During May, the company will borrow $20,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year 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 May 5. Prepare a budgeted balance sheet as of May 31

Answer 1

Minden company Schedule of Expected Cash Collections May Cash Sales 60,000 Cash Sales ( 220000 - 60000) 60% 96,000 Credit Sales 54.000 Total Cash Collections 2.10.000 Schedule of Expected Cash Disbursements May May purchases (120,000 0.50) 60,000 April Purchases 63,000 Total Cash Disbursement for Purchases 1,23,000 Cash Budget May 9,000 2,10,000 2,19,000 Cash Balance Beginning Add Cash Collections Total Cash Available Less Cash Disburtments: Inventory Purchases Selling and Administrative Expenses Equipment Purchases 1,23,000 72.000 6500 2,01,500 17,500 Total Cash Disbursement Excess (deficiency) of cash Financing: Borrowings Repayments Interest Total Financing Cash Balance, Ending 20000 -14500 -100 5400 22,900

Income Statement For the Quarter Ended May 30 220000 Sales Less:-COGS Opening inventory 30000 Add:- purchases 120000 Less:- closing inventory 40000 Gross Margin Selling and Administrative Expenses Depreciation Net Operating Income Interest Expenses Net Income 110000 110000 72.000 2,000 36,000 100 35,900 Balance Sheet May-31 Assets Current Assets: Cash Accounts Receivable ( 220000 - 60000) • 40% Inventory Total Current Assets Buildings and Equipment, Net 207000 + 6500 - 2000 Total Assets 22,900 64,000 40,000 1,26,900 211500 3,38,400 60,000 20,000 Liabilities and Equity Current Liabilities Accounts Payable (120,000 * 0.50 ) Note payable StockHolder's Equity: Capital Stock Retained Earnings ( 42500 + 35900 ) Total Liabilities and Equity 180000 78,400 3,38,400