Minden Company is a wholesale distributor of premium European chocolates. The co
ID: 2434506 • Letter: M
Question
Minden Company is a wholesale distributor of premium European chocolates. The company's bat sheet as of April 30 is given below:Minden Company
Balance Sheet
April 30
Assets
Cash .9,000
Accounts receivable .54,000
Inventory .30,000
Buildings and equipment, net of depreciation .207,000
Total assets .300,000
Liabilities and Stockholders' Equity
Accounts payable .63,000
Note payable .14,500
Capital stock, no par .180,000
Retained earnings .42,500
Total liabilitiesand stockholders' equity .300,000
The company is in the process of preparing budget data for May. A number of budget items have already been prepared, as stated below:
a. Sales are budgeted at $200,000 for May. Of these sales, $60,000 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 $120,000 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 $40,000.
d. Selling and administrative expenses for May are budgeted at $72,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,000 for the month.
e. The note payable on the April 30 balance sheet will be paid during May, with $100 in interest. (All of the interest relates to May.)
f. New refrigerating equipment costing $6,500 will be purchased for cash during May.
g. During May, the company will borrow $20,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.
Required:
l. Prepare a cash budget for May. Support your budget with a schedule of expected cash collections from sales and a schedule of expected cash disbursements for merchandise purchases.
2. Prepare a budgeted income statement for May. Use the absorption costing income statement format as shown in Schedule 9.
Schedule 9:
Schedules
Sales 1 2,000,000
Cost of Goods Sold 1, 6 1,300,000
Gross Margin 700,000
Selling and administrative expenses 7 576,000
Net Operating Income 124,000
Interest Expenses 8 21,900
Net Income 102,100
3. Prepare a budgeted balance sheet as of May 3l.
Explanation / Answer
Receipts
Cash in hand
9,000.00
Cash sales
60,000.00
Collections from credit sales
70,000.00
Accounts receivables of April
54,000.00
Bank loan against notes
20,000.00
213,000.00
B.Disbursements
40% payment against purchases in may
48,000.00
Accounts payable of April
63,000.00
Selling and administrative expenses
72,000.00
Notes payable of April paid with interest of100
14,600.00
Purchase of refrigerating equipment
6,500.00
204,100.00
Cash in hand A-B
8,900.00
Income statement under absorption costing
method
Sales
200,000.00
Less : Cost of goods sold
Opening inventory
30,000.00
Add: purchases
120,000.00
150,000.00
Less: Closing inventory
40,000.00
110,000.00
Gross margin
90,000.00
selling @ administration expenses
72,000.00
Depreciation
2,000.00
Interest on notes
100.00
74,100.00
Net income
15,900.00
Balance Sheet as on May
Cash
8,900.00
accounts receivables
70,000.00
Closing inventory
40,000.00
Building and equipment
207,000.00
Less: Depreciation
2,000.00
205,000.00
Refrigeration equipment
6,500.00
Total Assets
330,400.00
Accounts payable
72,000.00
Notes payable
20,000.00
Capital stock
180,000.00
retained earnings Opening balance
42,500.00
earnings during the year
15,900.00
58,400.00
Total liabilities and Stock Holders Equity
330,400.00
Receipts
Cash in hand
9,000.00
Cash sales
60,000.00
Collections from credit sales
70,000.00
Accounts receivables of April
54,000.00
Bank loan against notes
20,000.00
213,000.00
B.Disbursements
40% payment against purchases in may
48,000.00
Accounts payable of April
63,000.00
Selling and administrative expenses
72,000.00
Notes payable of April paid with interest of100
14,600.00
Purchase of refrigerating equipment
6,500.00
204,100.00
Cash in hand A-B
8,900.00
Income statement under absorption costing
method
Sales
200,000.00
Less : Cost of goods sold
Opening inventory
30,000.00
Add: purchases
120,000.00
150,000.00
Less: Closing inventory
40,000.00
110,000.00
Gross margin
90,000.00
selling @ administration expenses
72,000.00
Depreciation
2,000.00
Interest on notes
100.00
74,100.00
Net income
15,900.00
Balance Sheet as on May
Cash
8,900.00
accounts receivables
70,000.00
Closing inventory
40,000.00
Building and equipment
207,000.00
Less: Depreciation
2,000.00
205,000.00
Refrigeration equipment
6,500.00
Total Assets
330,400.00
Accounts payable
72,000.00
Notes payable
20,000.00
Capital stock
180,000.00
retained earnings Opening balance
42,500.00
earnings during the year
15,900.00
58,400.00
Total liabilities and Stock Holders Equity
330,400.00