Question

Balance Sheet April 30 Assets Cash $ 10, eee Accounts receivable 62.750 Inventory 32,750 Buildings and equipment, net of 219, depreciation Total assets $324,500 Liabilities and Stockholders' Equity Accounts payable $69.ee Note payable 22.700 Common stock 180,000 Retained earnings 52.890 Total liabilities and $324,500 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 $254.000 for May, or these sales. $76.200 wa 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 $137,000 during May. These purchases will 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 $45,000 d. Selling and administrative expenses for May are budgeted at $98,400, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $5,550 for the month. e. The note payable on the April 30 balance sheet will be paid during May, with $350 in interest. (All of the interest relates to May.) t New refrigerating equipment costing $8.700 will be purchased for cash during May. 9. During May, the company wil borrow $27400 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 Complete this question by entering your answers in the tabs below. Req1 Reg 3 Req 4 Req 5 and 2 1. Calculate the expected cash collections for May. 2. Calculate the expected cash disbursements for merchandise purchases for May Total cash collections Total cash disbursements

Answer 1

3.Cash Budget for May

Receipts	Dr.	Payments	Cr.
Opening balance of cash	$10,000	Purchase of Inventory (40% of $137,000)	$54,800
Cash Sales	$76,200	April accounts payable	$69,000
Credit sales collected ( $254,000 - $76,200 = $177,800 / 2 = $88,900/-)	$88,900	Selling & Administrative Expenses	$98,400
April accounts receivable	$62,750	Notes Payable ($22,700+$350)	$23,050
Borrowing from bank	$27,400	Purchase of refrigerating equipment	$8,700
Total Receipts	$265,250	Total Payments	$253,950
Opening Balance of cash in June	$11,300

1. The expected cash collection for May will exclude the borrowing from the bank and opening balance = $227,850/-

2. The total cash disbursement for merchandise purchase for May = $54,800/-

4. Budgeted income statement for May

Particulars		Amount($)
Revenue		$254,000
Less COGS		Nil
Gross Profit		$254,000
Less Operating Expenses:
Selling & Admin expenses	$98,400
Depreciation expenses	$5,550
Interest on notes payable	$350	$104,300
Net income / Profit		$149,700

5. Budgeted balance sheet as of May 31 :

Liabilities	Amount($)	Assets	Amount($)
Accounts Payable	$82,200	Cash	$11,300
Notes Payable	$27,400	Accounts Receivable	$88,900
Common Stock	$180,000	Inventory	$45,000
Retained Earnings $52,800+$149,700)	$202,500	Building & Equipment(less depreciation) ($219,000 - $5,550=$213,450)	$213,450
		Refrigeration Equipment	$8,700
Total Liabilities	$492,100	Total Assets	$367,350