Minden Company is a wholesale distributor of premium European chocolates. The co

Question

Minden Company is a wholesale distributor of premium European chocolates. The company's balance sheet as of April 30 is given 3 Minden Conpany Balance Sheet April 3 cave intry receivable $ 9,600 54,750 53,750 Buildings and equipment, net of depreciation214,000 332,100 3coseso) 0356-50 Cash Total asseta Liabilities and Stockholder Equity Accounts payable Note payable Common stook 70,500 18,100 180,000 Total liabilities and stockholders' equity 332,100 The company is in the process of preparing a budget for May and has assembled the following data: a. Sales are budgeted at $257,000 for May. Of these sales, $77100 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 $121,000 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 $31,000. d. Selling and administrative expenses for May are budgeted at $83,700, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,800 for the month. e. The note payable on the April 30 balance sheet will be paid during May, with $340 in interest. (All of the interest relates to May.) f. New refrigerating equipment costing $13,100 will be purchased for cash during May. g. During May, the company will borrow $22,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year

Explanation / Answer

1-a) Schedule of Expected cash collection Cash sales-May 77,100 Collections on account receivable April 30 balance 54,750 May sales (257000-77100)*50% 89950 total cash recepits 221,800 Schedule of Expected cash disbursements April 30 accounts payable balance 70,500 May purchases (121000*40%) 48400 total cash payments 118,900 1-b)                          Cash Budget                                                      Beginning cash balance 9,600 Add Collections from customers 221,800 total cash available 231,400 less Cash disbursements purchase of inventoru 118,900 selling and administrative expense 83,700 purchase of Equipment 13,100 total cash disbursements 215,700 Excess of cash available over disbursements 15,700 financing: borrowing -note 22,000 Repayments-note -18,100 interest -340 total financing 3,560 Ending cash balance 19,260 Budgeted income statement sales 257,000 cost of goods sold: beginning inventory 53,750 purchases 121,000 goods available for sale 174,750 ending invnetory 31,000 cost of goods sold: 143,750 Gross margin 113,250 Selling and administrative expesne 83,700 Depreciation expense 2,800 net operating income 26,750 interest expesne 340 net income 26,410 Budgeted balance sheet Assets Cash 19,260 Account receivable 89950 inventory 31,000 buildings & equipment,net of depreciaiton 224300 (214000+13100-2800) total Assets 364,510 Laibilities & stockholder's Equity Accounts payable 72600 note payable 22,000 common stock 180,000 Retained earnings (63500+26410) 89,910 total liabilities & stockholders equity 364510

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