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 $ 18,500 58,500 40,750 202,000 $ 319,750 $ 67,750 15,800 180,000 56,200 $ 319,750 The company is in the process of preparing a budget for May and has assembled the following data: a. Sales are budgeted at $263,000 for May. Of these sales, $78,900 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 $193,000 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 $63,000. d. Selling and administrative expenses for May are budgeted at $73,200, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $4,650 for the month. e. The note payable on the April 30 balance sheet will be paid during May, with $210 in interest. (All of the interest relates to May.) f. New refrigerating equipment costing $11,900 will be purchased for cash during May. 9. During May, the company will borrow $27.200 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:

Answer 1

1. Cash Collections for May :

Particulars	May	June
Total Sales	$263000
Cash Sales	$78900
Credit Sales	$184100
Credit Sales Collections	$92050	$92050
Collections from April	$58500
Expected cash collections from customers	$229450

2. Expected Cash disbursements for merchandise Purchases for May

40% of Purchases are paid in the month of purchase , remainder in the following month

Particulars	April	May	Cash disbursement in May
Total Purchases	$112917	$193000
40% in the month of purchase	$45167	$77200	$77200
Remainder 60% in the next month	$67750	$115800	$67750
Expected cash disbursement in May			$144950

3. Cash Budget for May :

Particulars	Amountin $
Opening Balance	$18500
Cash Sales	$78900
Collections from customers	$150550
Borrowed money received	$27200
Total Cash receipts during May(A)	$275150
Payments :
Cash disbursements for purchases	$144950
Selling & administraction expenses	$73200
Repayment of note payable	$15800
Interest on note payable	$210
New Refrigerating Equipment purchase	$11900
Total Payments (B)	$246060
Closing balance (A-B)	$29090

4. Budgeted incoome statement:

Particulars	Amount
Sales	$263000
Less: Cost of goods sold ($193000-$63000)	$130000
Gross Profit	$133000
Selling & administrativee expenses	$73200
Depreciation expense	$4650
Interest expense	$210
Net Income before tax	$54940

5. MindenCompany

Budgeted Balance Sheet :

Assets	Note	Amount
Cash	Closing balanceof cash budget	$29090
Accounts Receivable	Remaining 50% to be realized in June	$92050
Inventory	Closing balance at the end of May given plus opening balance ($40750+$63000)	$103750
Buildings and equipments	after additional equipment and Net of depreciation	$209250
Total Assets		$434140
Liabilities and Stockholder's equity
Accounts Payable	From cash disbursement table, 60% in the next month of purchase	$115800
Note Payable		$27200
Common stock		180000
Retained earnings	Previous balance plus current profit ($56200+54940)	$111140
Total liabilities		$434140