Minden Company is a wholesale distributor of premium European chocolates. The co
ID: 2516184 • 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:
227,000
350,300
61,300
350,300
Sales are budgeted at $276,000 for May. Of these sales, $82,800 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 $147,000 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 $97,500, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $3,200 for the month.
The note payable on the April 30 balance sheet will be paid during May, with $235 in interest. (All of the interest relates to May.)
During May, the company will borrow $29,200 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 CompanyBalance Sheet
April 30 Assets Cash $ 10,300 Accounts receivable 70,000 Inventory 43,000 Buildings and equipment, net of depreciation
227,000
Total assets $350,300
Liabilities and Stockholders’ Equity Accounts payable $ 86,000 Note payable 23,000 Common stock 180,000 Retained earnings61,300
Total liabilities and stockholders’ equity $350,300
Explanation / Answer
1-a) Schedule of Expected cash collection Cash sales-May 82,800 Collections on account receivable April 30 balance 70,000 May sales (276000-82800)*50% 96600 total cash recepits 249,400 Schedule of Expected cash disbursements April 30 accounts payable balance 86,000 May purchases (147000*40%) 58800 total cash payments 144,800 1-b) Cash Budget Beginning cash balance 10,300 Add Collections from customers 249,400 total cash available 259,700 less Cash disbursements purchase of inventoru 144,800 selling and administrative expense 97,500 purchase of Equipment 12,100 total cash disbursements 254,400 Excess of cash available over disbursements 5,300 financing: borrowing -note 29,200 Repayments-note -23,000 interest -235 total financing 5,965 Ending cash balance 11,265 Budgeted income statement sales 276,000 cost of goods sold: beginning inventory 43,000 purchases 147,000 goods available for sale 190,000 ending invnetory 43,000 cost of goods sold: 147,000 Gross margin 129,000 Selling and administrative expesne 97,500 Depreciation expense 3,200 net operating income 28,300 interest expesne 235 net income 28,065 Budgeted balance sheet Assets Cash 11,265 Account receivable 96600 inventory 43,000 buildings & equipment,net of depreciaiton 235900 (227000+12100-3200) total Assets 386,765 Laibilities & stockholder's Equity Accounts payable 88200 note payable 29,200 common stock 180,000 Retained earnings (61300+28065) 89,365 total liabilities & stockholders equity 386765