Question

Cash 59,000 158 000 Accounts recelvable Inventory Buildings and equipment, net of depreciation 78.300 268,000 $563.300 Total assets Stockholders' Equity S 212,800 Accounts pavable Common stock 216.000 Retained earnings Total liabilities and stockholders' equity 134,500 5563 300 The company is in the process of preparing a budget for October and has assembled the following data: 1 be credit sales. Forty percent of a month's credit sales are collected in the month the sales are made, and the remaining 60% i the following month. All of the September 30 accounts receivable will be collected in October. collected 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 solde on account. Thirty percent of all purchases are paid for in the month of purchase and 70% are paid 2. suppliers will be paid during October. $87,800, exclusive of depreciation. These expenses will be paid in for in the following month. All of the September 30 accounts payable 4. Selling and administrative expenses for October are budgeted cash. Depreciation is budgeted at $2,680 for the month. Required: 1. Using the information provided, calculate or prepare the following: The budgeted merchandise purchases for October c. The budgeted cash disbursements for merchandise purchases for October, d. The budgeted net operating income for October. budgeted balance sheet at October 31. e 2. Assume the following changes to the underlying budgeting assumptions: (1) 50% of a month's credit sales are collected in the month the sales are made and the remaining 50 % is collected in the following month. (2) the ending merchandise inventory is always 10% of the following month's cost are paid for in the month of purchase and 80 % are paid for 20% of all purchases the following month. Using these new assumptions, calculate or prepare goods sold, and a The budgeted cash collections for October b. The budgeted merchandise purchases for October. c. The budgeted cash disbursements for merchandise purchases for October Ne operang income for the month of October.

Answer 1

Company Assuming Changes Sales Budget Sales Budget October November October November Sales Sales 580000 590000 580000 590000 Cash Cash 203000 203000 206500 206500 Credit Credit 383500 377000 383500 377000 Sales Collections Sales Collections October October September 158000 September 158000 October Cash sale October Cash sale 203000 203000 October October 150800 188500 511800 549500 Purchase Budget Purchase Budget October October Cost of goods sold 261000 Cost of goods sold 261000 Ending Inventory 79650 Ending Inventory 26550 340650 287550 Beginning Inventory -78300 Beginning Inventory -78300 Purchases Purchases 209250 262350 Purchase Payments Purchase Payments October October September 212800 September 212800 October October 78705 41850 291505 254650

Cash Budget Cash Budget For the month ending October 31 For the month ending October 31 59000 Opening Balance 59000 Opening Balance Sales Collections 511800 Sales Collections 549500 Cash Available Cash Available 570800 608500 Purchase Payments Purchase Payments 291505 254650 Selling & Admin Exp Selling & Admin Exp 87800 87800 Payments 379305 Payments 342450 Excess Cash over payments Excess Cash over payments 191495 266050 Statement of Income Statement of Income For the month ending October 31 For the month ending October 31 Sales Sales 580000 580000 Less: Less: 78300 Opening Inventory 78300 Opening Inventory Purchases 262350 Purchases 209250 Closing Inventory Closing Inventory -79650 -26550 Cost of goods sold Cost of goods sold 261000 261000 Gross Profit Gross Profit 319000 319000 Selling & Admin Exp Selling & Admin Exp 87800 87800 Depreciation Depreciation 2680 90480 2680 90480 Net Income Net Income 228520 228520 Balance sheet Balance sheet As at October 31 As at October 31 Assets Assets Cash Cash 266050 191495 Accounts Receivable Accounts Receivable 226200 188500 26550 Inventory 79650 Inventory Building & Equipment Building & Equipment 265320 265320 Total Assets Total Assets 762665 746420 Liabilities Liabilities Accounts Payable Accounts Payable 183645 167400 Common Stock Common Stock 216000 216000 Retained Earnings Retained Earnings 363020 363020 Total Liabilities & Equity Total Liabilities & Equity 746420 762665