Minden Company is a wholesale distributor of premium European chocolates. The co
ID: 2333494 • Letter: M
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 $ 12,000 77,500 42,000 225,000 $ 356,500 Liabilities and Stockholders' Equity Accounts payable Note payable Common stock Retained earnings Total liabilities and stockholders' equity $ 78,250 19,300 180,000 78,950 $ 356,500 The company is in the process of preparing a budget for May and has assembled the following data a. Sales are budgeted at $231,000 for May. Of these sales, $69,300 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 $139,000 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 $55,000 d. Selling and administrative expenses for May are budgeted at $83,400, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $6,200 for the month e. The note payable on the April 30 balance sheet will be paid during May, with $155 in interest. (All of the interest relates to May.) f. New refrigerating equipment costing $12,500 will be purchased for cash during May g. During May, the company will borrow $24,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.Explanation / Answer
1) Months cash collections = april credit + cash sales + may credit 77500 + 69300 + (231000-69300)/2 = 227650 2) Months purchase cash disbursements = april outstanding + may purchases payment 78250+(139000*0.40) = 133850 3) Cash Budget for May: Beginning cash balance 12000 add: Collections 227650 Total cash available 239650 Less:Cash disbursements: Purchases 133850 Selling & Admin exp 83400 Purchase of equipment 12500 Total cash disbursements 229750 Excess of cash available over disbursements 9900 Financing: Borrowing - Note 24000 Repayments - Note -19300 Interest -155 Total financing 4545 Ending cash balance 14445 4)Income Statement : Sales 231000 Less: Purchases consumed (42000+139000-55000) 126000 Gross profit 105000 Less: Expenses: Selling and admin 83400 Depreciation 6200 Interest 155 Total expenses 89755 Net Income 15245 5)Balance Sheet as on 31 May : Assets: Cash 14445 AR (231000-69300)/2 80850 Inventory 55000 Building and equipment, net of dep (225000+12500-6200) 231300 Total Assets 381595 Liabilities and Stockholder's Equity: AP (139000 * 0.60) 83400 NP 24000 CS 180000 RE (78950 + 15245) 94195 Total Libilities and Stockholder's Equity 381595