Minden Company is a wholesale distributor of premium European chocolates. The co
ID: 2463944 • 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:
207,000
300,000
42,500
300,000
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.
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.
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.
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.)
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.
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
Minden Company All Amounts in $ 1. Expected Cash Collections from Sales and Expected Cash Disbursements for Merchandise Purchases Particulars May May Cash Collections From Cash Sales in May 60000 From Credit Sales in April 54000 From Credit Sales in May 70000 184000 Cash Disbursements For Purchases of April 63000 For Purchases of May 48000 111000 2. Cash Budget for May Opening Cash Balance 9000 Bank Borrowings 20000 Collections from Customers 184000 213000 Disbursements for Purchases -111000 Selling and Administrative Expenses -72000 Repayment of Note payable with interest -14600 Refrigerating Equipment Purchased -6500 -204100 Closing Cash Balance 8900 3. Income Statement for May Sales 200000 Cost of Goods Sold Opening Inventory 30000 Purchases 120000 Less : Closing Inventory 40000 110000 Gross Margin 90000 Selling and Administrative Expenses 72000 Depreciation 2000 Interest on Note payable 100 74100 Net Income transfer to Retained Earnings 15900 4. Balance Sheet as on May 31 Assets Cash $ 8900 Accounts receivable 70000 Inventory 40000 Buildings and equipment net of depreciation 211500 Total assets $ 330400 Liabilities and Stockholders’ Equity Accounts payable $ 72000 Note payable 20000 Common stock 180000 Retained earnings 58400 Total liabilities and stockholders’ equity $ 330400