Minden Company is a wholesale distributor of premium European chocolates. The co
ID: 2409379 • 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:
236,000
346,000
72,050
346,000
Sales are budgeted at $296,000 for May. Of these sales, $88,800 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.
Purchases of inventory are expected to total $192,000 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.
Selling and administrative expenses for May are budgeted at $98,700, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,150 for the month.
The note payable on the April 30 balance sheet will be paid during May, with $220 in interest. (All of the interest relates to May.)
During May, the company will borrow $23,200 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.
Prepare a schedule of expected cash collections from sales and a schedule of expected cash disbursements for merchandise purchases..
Prepare a cash budget for May. (Cash deficiency, repayments and interest should be indicated by a minus sign.)
Prepare a budgeted balance sheet as of May 31.
Minden Company is a wholesale distributor of premium European chocolates. The company’s balance sheet as of April 30 is given below:
Explanation / Answer
1-a. Schedule for expected cash collection from sales Budgeted sales $296,000 Cash sales $88,800 Credit sales $207,200 Collection from credit sales for May $103,600 (207200/2) Collection from credit sales for April $57,000 Expected cash collection for May $249,400 Schedule for expected cash disbursements for merchandise purchases Expected purchase of inventory $192,000 Cash paid for purchase (192000 x 40%) $76,800 Cash paid for accounts payable for April $72,750 Expected cash disbursement for merchandise purchases $149,550 1-b. Cash budget for May Receipts Budgeted sales $296,000 Cash sales $88,800 Credit sales $207,200 Collection from credit sales for May $103,600 Collection from credit sales for April $57,000 Expected cash collection for May $249,400 Payments Expected purchase of inventory $192,000 Cash paid for purchase (192000 x 40%) $76,800 Cash paid for accounts payable for April $72,750 Expected cash disbursement for merchandise purchases $149,550 Selling and administrative expenses $98,700 Net cash availabe from operating activities $1,150 Repayment of note payable ($21,200) Interest ($220) Purchase of new refrigerating equipment ($6,800) New note payable $23,200 Net cash available/(deficiency) ($3,870) Beginning Cash Balance $10,500 Ending cash Balance $6,630 2. Income statement for the month of May Sales $296,000 Less: Cost of goods sold: Opening inventory $42,500 Add: Purchase of inventory in current month $192,000 Cost of goods available for sale $234,500 Less: Closing inventory $51,500 $183,000 Gross Profit $113,000 Less: Operating expenses Selling and administrative expenses $98,700 Depreciation $2,150 Total operating expenses $100,850 Operating income $12,150 Non-operating expenses: Interest expenses $220 Net income $11,930 3. Budgeted Balance Sheet as of May 31 Assets Cash $6,630 Accounts receivable $103,600 Inventory $51,500 Buildings and equipment, net of depreciation $240,650 Total Assets $402,380 Liabilities and Stockholders' Equity Accounts Payable $115,200 Note payable $23,200 Common Stock $180,000 Retained Earnings $83,980 Total Liabilities and Stockholders' Equity $402,380 Working note: Buildings and equipment, net of depreciation $236,000 Add: New refrigerating equipment $6,800 Less: Depreciation for the month ($2,150) Buildings and equipment, net of depreciation $240,650 Retained Earnings, April $72,050 Add: Net income $11,930 Retained Earnings, May $83,980