Question

Wheeling Company is a merchandiser that provided a balance sheet as of september 30 as shown below

Wheeling Company is a merchandiser that provided a balance sheet as of September 30 as shown below: Wheeling Company Balance Sheet September 30 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 $ 72,200 162.000 81,000 255,000 $570,200 $ 238,700 216.000 115,500 $570,200 The company is in the process of preparing a budget for October and has assembled the following data: 1. Sales are budgeted at $600,000 for October and $610,000 for November. Of these sales, 35% will be for cash, the remainder will be credit sales. Forty percent of a month's credit sales are collected in the month the sales are made, and the remaining 60% is collected in the following month. All of the September 30 accounts receivable will be collected in October 2. The budgeted cost of goods sold is always 45% of sales and the ending merchandise inventory is always 30% of the following month's cost of goods sold. 3. All merchandise purchases are on account. Thirty percent of all purchases are paid for in the month of purchase and 70% are paid for in the following month. All of the September 30 accounts payable to suppliers will be paid during October 4. Selling and administrative expenses for October are budgeted at $81,200, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,550 for the month. Required: 1. Using the information provided, calculate or prepare the following: a. The budgeted cash collections for October

Answer 1

Wheeling Company 1. Using the information provided, calculate or prepare the following: 2. Assume the following changes to the underlying budgeting assumptions: Sales Budget Sales Budget Cash Credit Total October November 210000 213500 390000 396500 600000 610000 Cash Credit Total October November 210000 213500 390000 396500 600000 610000 Collections Collections September October Total October 162000 366000 528000 September October Total October 162000 405000 567000 Purchase Budget Purchase Budget COGS Ending Inventory COGS Ending Inventory October 270000 82350 352350 -81000 271350 October 270000 27450 297450 -81000 216450 Less:Beg. Inv. Purchase Less:Beg. Inv. Purchase Disbursement Disbursement September October Total October 238700 81405 320105 September October Total October 238700 43290 281990

Cash Budget For the month ending October 31 Cash Budget For the month ending October 31 Opening balance Collections Cash Available October 72200 528000 600200 Opening balance Collections Cash Available October 72200 567000 639200 Payments: Purchase Selling and administrative expenses Total Payments Excess cash over payments 320105 81200 401305 198895 Payments: Purchase Selling and administrative expenses Total Payments Excess cash over payments 281990 81200 363190 276010 600000 600000 Income Statement For the month ending October 31 Sales Cost of goods sold: Opening stock Purchases Ending stock Gross Margin Expenses: Selling and administrative expenses Depreciation Net Income 81000 271350 -82350 Income Statement For the month ending October 31 Sales Cost of goods sold: Opening stock Purchases Ending stock Gross Margin Expenses: Selling and administrative expenses Depreciation Net Income 81000 216450 -27450 270000 330000 270000 330000 81200 2550 81200 2550 83750 246250 83750 246250

Balance sheet As at October 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 198895 234000 82350 252450 767695 Balance sheet As at October 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 276010 195000 27450 252450 750910 189945 216000 361750 767695 173160 216000 361750 750910