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 $ 14,500 72,750 31,750 209,000 $ 328,000 $ 69,500 16,000 180,000 62,500 $ 328,000 The company is in the process of preparing a budget for May and has assembled the following data: a. Sales are budgeted at $247,000 for May. Of these sales, $74,100 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 $172,000 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 $58,500. d. Selling and administrative expenses for May are budgeted at $87,600, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $6,850 for the month. e. The note payable on the April 30 balance sheet will be paid during May, with $385 in interest. (All of the interest relates to May.) f. New refrigerating equipment costing $13,400 will be purchased for cash during May. g. During May, the company will borrow $22,900 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.

Answer 1

B 14,500 233,300 247,800 Cash Budget For month of May 3 Beginning cash balance 4 Add collection from customers 5 Total cash available 6 Less cash disbursements: 7 Purchase of inventory Selling and administrative expenses 9 Purchase of equipment 10 Total cash disbursements 11 Excess of cash available over disbursemen 12 Financing 13 Borrowing-note 14 Repayments-note 15 Interest 16 Total financing 17 Ending cash balance 138,300 87,600 13,400 239,300 8,500 22,900 (16,000) (385) 6,515 15,015

1 A Cash Budget 2 For month of May 3 Beginning cash balance 14500 4 Add collection from customers =72750+74100+(247000-74100)*0.5 5 Total cash available =SUM(B3:14) 6 Less cash disbursements: 7 Purchase of inventory =69500+(172000*0.4) Selling and administrative expenses 87600 Purchase of equipment 13400 10 Total cash disbursements =SUM(B7:39) 11 Excess of cash available over disbursements =B5-B10 12 Financing Borrowing-note 22900 14 Repayments-note - 16000 Interest -385 16 Total financing =SUM(B13:315) 17 Ending cash balance =B16+B11 8 9 13 15

247,000 Budgeted income statement For the month of May 3 Budgeted sales 4 Less: Cost of goods sold 5 Purchases 172,000 Add: Beginning inventory 31,750 7 Less: Ending inventory 58,500 8 Gross profit 9 Less: Depreciation 10 Less: Interst on note 11 Less: Selling and administrative expenses 12 Net operating income 145,250 101,750 6,850 385 87,600 6,915 13 14 15 Balance Sheet 16 May-31 17 Assets 18 Cash 19 Accounts receivable 20 Inventory 21 Buildings and equipment, net of depreciation 22 Total assets 23 24 Liabilities and stockholders' equity 25 Accounts payable 26 Note payable 27 Common stock 28 Retained earnings 29 Total liabilities and stockholders' equity 15,015 86,450 58,500 215,550 375,515 103,200 22,900 180,000 69,415 375,515

247000 Budgeted income statement For the month of May 3 Budgeted sales 4 Less: Cost of goods sold 5 Purchases 172000 Add: Beginning inventory 31750 Less: Ending inventory 58500 8 Gross profit 9 Less: Depreciation 10 Less: Interst on note 11 Less: Selling and administrative expenses 12 Net operating income 77 =B5+B6-B7 =C3-C7 6850 385 87600 =C8-C11-C10-09 13 14 15 Balance Sheet 16 11444 17 Assets 18 Cash 19 Accounts receivable 20 Inventory 21 Buildings and equipment, net of depreciation 22 Total assets 23 24 Liabilities and stockholders' equity 25 Accounts payable 26 Note payable 27 Common stock 28 Retained earnings 29 Total liabilities and stockholders' equity 15015 =(247000-74100)*0.5 58500 =209000-6850+13400 =SUM(B18:321) =172000*0.6 22900 180000 =62500+6915 =SUM(B25:B28)