Question

Deacon Company is a merchadising company that is preparing a budget for the three-month period ended june 30th. The following information is available

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 58.600 33,200 40,000 142.000 $ 273,800 69,200 70.000 134,600 $ 273.800 May Budgeted Income Statements April Sales $100,000 Cost of goods sold 60,000 Gross margin 40,000 Selling and administrative expenses 22,100 Net operating income $ 17,900 $110,000 66.000 44.000 23,600 $ 20,400 June $130,000 78,000 52.000 26,600 $ 25,400 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 $140,000. 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 Farh month's ondinn merchandise inuentan chuid anal Cannnnn 50% of the navi manth'ernet of Anne end 26 Navt >

Answer 1

1.

	April	May	June	Quarter
Cash sales	$60,000	$66,000	$78,000
Collection from customers	$41,200	$40,800	$45,600
Total cash collections	$101,200	$106,800	$123,600	$331,600

Calculations:

	April	May	June
Sales	$100,000	$110,000	$130,000
Cash sales (60%)	$60,000	$66,000	$78,000
Credit sales (40%)	$40,000	$44,000	$52,000

	Credit sales	% of sales	April	May	June
March sales collected in April			$33,200
April:	$40,000
Collected in April		20%	$8,000
Collected in May		80%		$32,000
May:	$44,000
Collected in May		20%		$8,800
Collected in June		80%			$35,200
June:	$52,000
Collected in June		20%			$10,400
Total collections from customers			$41,200	$40,800	$45,600

2.

	April	May	June	July
Cost of goods sold (i)	$60,000	$66,000	$78,000	$84,000
Desired ending inventory:
Basic	$10,000	$10,000	$10,000
50% of next month's cost of goods sold	$33,000	$39,000	$42,000
Total desired ending inventory (ii)	$43,000	$49,000	$52,000
Total inventory needed (i + ii)	$103,000	$115,000	$130,000
(Less): Beginning Balance	($40,000)	($43,000)	($49,000)
Budgeted merchandise purchases	$63,000	$72,000	$81,000

3.

	April	May	June	Quarter
Cash purchases (10% of budgeted purchases)	$6,300	$7,200	$8,100
Paid to accounts payable at Mar 31	$69,200
Paid for April purchases (63,000 x 90%)		$56,700
Paid for May purchases (72,000 x 90%)			$64,800
Total cash disbursements	$75,500	$63,900	$72,900	$212,300

4.

Deacon Company
Balance Sheet
June 30
Assets
Cash	$109,350
Accounts receivable (52,000 x 80%)	$41,600
Inventory	$52,000
Buildings and equipment, net of depreciation (142,000-3,750)	$138,250
Total Assets	$341,200
Liabilities and stockholder's equity
Accounts payable (81,000 x 90%)	$72,900
Common stock	$70,000
Retained earnings (134,600 + 63,700 net income**)	$198,300
Total liabilities and stockholder's equity	$341,200

Calculations:

Cash
Beginning balance	$58,600
Total cash collections	$331,600
Cash disbursements for purchases	($212,300)
Selling and administrative expenses*	($68,550)
Ending Balance	$109,350

*

	April	May	June	Quarter
Total selling and administrative expenses	$22,100	$23,600	$26,600	$72,300
(Less): Depreciation expense	($1,250)	($1,250)	($1,250)	($3,750)
Cash paid for selling and administrative expenses	$20,850	$22,350	$25,350	$68,550

**

	April	May	June	Quarter
Net income	$17,900	$20,400	$25,400	$63,700