Question

Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30th. The following information is available Deacon Company Balance Sheet March 31 Assets Cash Accounts receivable Inventory Buildings and equipment, net of depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings Total liabilities and stockholders' equity $ 62,000 43,600 46,000 107,000 $ 258,600 $ 63,600 70,000 125,000 $ 258, 600 Budgeted Income Statements April Sales $120,000 Cost of goods sold 72,000 Gross margin 48,000 Selling and administrative expenses 24,900 Net operating income $ 23,100 May $130,000 78,000 52,000 26,400 25,600 June $ 150,000 90,000 60,000 29,400 $ 30,600 Budgeting Assumptions: a. 60% of sales are cash sales and 40% of sales are credit sales. Twenty percent of all credit sales are collected in the month of sale and the remaining 80% are collected in the month subsequent to the sale. b. Budgeted sales for July are $160,000. c. 10% of merchandise inventory purchases are paid in cash at the time of the purchase. The remaining 90% of purchases are credit purchases. All purchases on credit are paid in the month subsequent to the purchase. The accounts payable at March 31 will be paid in April. d. Each month's ending merchandise inventory should equal $10,000 plus 50% of the next month's cost of goods sold. e. Depreciation expense is $1,900 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred.

Answer 1

Requirement 1 | Expected Cash Collections Particulars Total Sales April 120,000 $ May 130,000 $ June 150,000 $ Quarter 400,000 $ $ Cash Sales Credit Sales $ $ 72,000 $ 48,000 $ 78,000 52,000 90,000 $ 60,000 $ 240,000 160,000 $ $ Collections : - Cash Sales - 20% of Credit Sales - 80% of Credit Sales Total Cash Collections $ $ $ $ $ 72,000 9,600 43,600 125,200 $ $ $ 78,000 10,400 38,400 126,800 90,000 $ 12,000 $ 41,600 $ 143,600 $ 240,000 32,000 123,600 395,600 $ $ $ Requirement 2 | Budgeted Merchandise Purchases Particulars Budgeted Sales May April 120,000 $ June 150,000 $ Total 400,000 $ 130,000 $ Budgeted Cost of Goods Sold Add : Desired Ending Inventory Total Needed Less : Beginning Inventory Budgeted Purchases $ $ $ $ $ 72,000 $ 49,000 $ 121,000 $ 46,000 75,000 $ 78,000 $ 55,000 $ 133,000 $ 49,000 $ 84,000 $ 90,000 $ 58,000 $ 148,000 $ 55,000 $ 93,000 $ 240,000 58,000 298,000 46,000 252,000 $ Requirement 3 | Expected Cash Disbursements Particulars 10% of Current Month Purchases 90% of Previous Month Purchases Budgeted Cash Disbursements for Merchandise Purchases $ $ $ $ $ April 7,500 63,600 71,100 May 8,400 67,500 75,900 June 9,300 $ 75,600 $ 84,900 $ Quarter 25,200 206,700 231,900 $ $ $ $

$ Requirement 4 Balance Sheet Particulars Assets Cash Accounts Receivables Inventory Buildings and Equipment, Net of Depreciation Total Assets $ $ $ $ $ 150,700 48,000 58,000 101,300 358,000 Liabilities and Stockholders' Equity Accounts Payable Common Stock Retained Earnings Total Liabilities and Stockholders' Equity $ $ $ $ 83,700 70,000 204,300 358,000