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 18,700 70,250 41,250 230,000 $ 360,200 $ 72,250 13,700 180,000 94,250 $ 360,200 The company is in the process of preparing a budget for May and has assembled the following data: a. Sales are budgeted at $214,000 for May. Of these sales, $64,200 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 $122,000 during May. These purchases 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 $47,500. d. Selling and administrative expenses for May are budgeted at $85,500, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,050 for the month. e. The note payable on the April 30 balance sheet will be paid during May, with $390 in interest. (All of the interest relates to May.) f. New refrigerating equipment costing $16,300 will be purchased for cash during May. g. During May, the company will borrow $24,500 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

A B 1 1 and 2) 2. Shcedule of Expected Cash collections 3 Cash sales - May $ 64,200 4 Collections on accounts receivable 5 April 30 balance $ 70,250 6 May sales $ 74,900 7 Total cash collections $ 209,350 8 9 Shcedule of Expected Cash Disbursement 10 April 30 accounts payable balance $ 72,250 11 May purchases $ 48,800 12 Total cash disbursements $ 121,050

13 14 3) $ 18,700 $ 209,350 $ 228,050 15 Minden Company 16 Cash budget 17 For the month of May 18 Beginning cash balance 19 Add: collections from customers 20 Total cash available 21 Less: cash disbursements 22 Purchase of inventory 23 Selling and Administrative expenses 24 Purchase of equipment 25 Total cash disbursements 26 Excess of cash available over disbursements 27 Financing 28 Borrowing-note 29 Repayments-Note 30 Interest 31 Total financing 32 Ending cash balance 33 $ 121,050 $ 85,500 $ 16,300 $ 222,850 $5,200 $ 24,500 $ -13,700 $ -390 $ 10,410 $ 15,610

34 4) $ 214,000 $ 115,750 $ 98,250 $ 87,550 $ 10,700 $ 390 $ 10,310 35 Minden company 36 Budgeted income statement 37 For the month of May 38 Sales 39 Less: Cost of goods sold 40 Gross margin 41 Less: Selling and administrative expenses 42 Net operating income 43 Less:Interest expense 44 Net income 45 46 5) 47 Minden comapany 48 Budgeted balance sheet 49 May-31 50 Assets 51 Cash 52 Accounts receivable 53 Inventory 54 Buidling and equipment(net of depreciation) 55 Total Assets 56 57 Liabilities and stockholders equity 58 Accounts payable 59 Note payable 60 Common stock 61 Retained Earnings 62 Total liabilities and stockholders equity $ 15,610 $ 74,900 $ 47,500 244250 $ 382,260 $ 73,200 $ 24,500 $ 180,000 $ 104,560 $ 382,260

A B 1 1 and 2) 2 Shcedule of Expected Cash collections 3 Cash sales - May 64200 4 Collections on accounts receivable 5 April 30 balance 70250 6 May sales =(214000-64200) *1/2 7 Total cash collections =+B3+B5+B6 8 9 Shcedule of Expected Cash Disbursement 10 April 30 accounts payable balance 72250 11 May purchases =122000*40% 12 Total cash disbursements =+B10+B11

13 14 3) 18700 =+B7 =+B18+B19 =+B12 85500 15 Minden Company 16 Cash budget 17 For the month of May 18 Beginning cash balance 19 Add: collections from customers 20 Total cash available 21 Less: cash disbursements 22 Purchase of inventory 23 Selling and Administrative expenses 24 Purchase of equipment 25 Total cash disbursements 26 Excess of cash available over disbursements 27 Financing 28 Borrowing-note 29 Repayments-Note 30 Interest 31 Total financing 32 Ending cash balance 33 16300 =+B22+B23+B24 =+B20-B25 24500 - 13700 |-390 =+B28+B29+B30 =+B26+B31

37 34 4) 35 Minden company 36 Budgeted income statement For the month of May 38 Sales 214000 39 Less: Cost of goods sold =41250+122000-47500 40 Gross margin =+B38-B39 41 Less: Selling and administrative expenses =85500+2050 42 Net operating income =+B40-B41 43 Less:Interest expense 390 44 Net income =+B42-343 45 46 5) 47 Minden comapany 48 Budgeted balance sheet 49 11444 50 Assets 51 Cash =+B32 52 Accounts receivable =(214000-64200) *1/2 53 Inventory 47500 54 Buidling and equipment(net of depreciation) =230000+16300-2050 55 Total Assets =+B51+B52+B53+B54 56 57 Liabilities and stockholders equity 58 Accounts payable =122000*(100%-40%) 59 Note payable 24500 60 Common stock 180000 61 Retained Earnings =94250+B44 62 Total liabilities and stockholders equity =SUM(B58:361)