Question

Weller Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operation:s follow: . Sales are budgeted at $350,000 for November, $370,000 for December, and $360,000 for January. . Collections are expected to be 80% in the month of sale and 20% in the month following the sale · The cost of goods sold is 72% of sales * The company desires an ending merchandise inventory equal to 80% of the cost of goods sold in the following month .Payment for merchandise is made in the month following the purchase . Other monthly expenses to be paid in cash are $21,500 Monthly depreciation is $21,300 Ignore taxes Balance Sheet October 31 Assets Cash $ 22,300 83,300 201,600 1,007,000 Accounts receivable Merchandise inventory Property, plant and equipment (net of $597,000 accumulated depreciation) $1,314,200 Total assets Liabilities and Stockholders' Equity Accounts payable $ 196,300 650,000 467,900 Common stock Retained earnings $1,314,200 Total 1liabilities and stockholders equity Required: a. Prepare a Schedule of Expected Cash Collections for November and December. b. Prepare a Merchandise Purchases Budget for November and December. c. Prepare Cash Budgets for November and December. d. Prepare Budgeted Income Statements for November and December. e. Prepare a Budgeted Balance Sheet for the end of December.

Answer 1

Solution Requirement a Prepare a schedule of Expected cash collections for November and cember SCHEDULE OF EXPECTED CASH COLLECTION November December Cash Collections from Accounts Receivables 83,300 Cash collection from sales: November month sales 280,000$70,000 December month sales Expected cash collection $363,300366,00o $74,000 Accounts Receivable as at December end-$370,000 x 20% uirement b : Merchandise p urchase Budget for November and December MERCHANDISE PURCHASE BUDGET November December Budgeted Cost of goods sold 252,000 $266,400 Add: Desired ending inventor 207,360 213,120 Total merchandise needed $465,120$473,760 Less: Beginning inventor 201,600 213,120 Budgeted merchandise purchase 263,520$260,640 $360,000 x 72% x 80% = Inventory as at December end- $207,360 Requirement c: Cash budget for November and December CASH BUDGET November December Beginning Cash Balance Add: Expected cash collections 363,300 366,000 Total Cash available Less: Budgeted cash disbursement for: Merchandise purchase 263,520 21,500$21,500 Other monthly expenses Total cash disburs ement 285,020 $167,800 $248,780 Ending Cash Balance

Requirement d : Budgeted Income Statements for November and December BUDGETED INCOME STATEMENT November December Sales revenue 350,000 370,000 Less: Cost of goods sold 266,400 Gross profit $98,000$103,600 Less: Operating expenses: Other Monthly Expenses 21,500 ($21,500) Depreciation Budgeted net income 55,200$60,800 WELLER INDUSTRIAL GAS CORPORATION BUDGETED BALANCE SHEET As at December 31, 2xxx Assets Cash $248,780 Accounts Receivable 74,000 Merchandiseinventory Property, Plant & equipment ($1,007,000 5$21,300 $21,300 $207 360 964,400 Total assets $1,494,540 Liabilities and Stockholder's Equity Accounts payable $260,640 Common stock Retained earnings ($467,900+ $55,200 $21,300) Total liabilities and stockholder's equity 583,900 1,494,540