Minden Company is a wholesale distributor of premium European chocolates. The co
ID: 2447080 • 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:
258,000
387,200
104,750
387,200
Sales are budgeted at $240,000 for May. Of these sales, $72,000 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.
Purchases of inventory are expected to total $118,000 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 $93,500, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,400 for the month.
The note payable on the April 30 balance sheet will be paid during May, with $160 in interest. (All of the interest relates to May.)
During May, the company will borrow $26,600 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.
1. Prepare a schedule of expected cash collections from sales and a schedule of expected cash disbursements for merchandise purchases.
2. Prepare a cash budget for May.
3. Prepare a budgeted income statement for May.
4. Prepare a budgeted balance sheet as of May 31.
Minden CompanyBalance Sheet
April 30 Assets Cash $ 16,700 Accounts receivable 75,500 Inventory 37,000 Buildings and equipment, net of depreciation
258,000
Total assets $387,200
Liabilities and Stockholders’ Equity Accounts payable $ 86,750 Note payable 15,700 Common stock 180,000 Retained earnings104,750
Total liabilities and stockholders’ equity $387,200
Explanation / Answer
1) Expected cash collection from sales
Cash disbursements
2) Cash budget for may
Budgeted income statement
Less:COGS
(37,000 +118,000 - 31,500)
Budgeted balance sheet
Cash sales for May $72,000 Credit sales collected May 84,000 April 75,500 Total cash receipts $231,500