Minden Company is a wholesale distributor of premium European chocolates. The co
ID: 2536133 • 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: Minden Company Balance Sheet April 30 Assets $11,100 Accounts receivable Inventory Buildings and equipment, net of depreciation Total assets 37,500 238,000 $ 359,100 Liabilities and Stockholders' Equity Accounts payable Note payable Common stock Retained eanings Total liabilities and stockholders' equity 180,000 91.700 $ 359,100 The company is in the process of preparing a budget for May and has assembled the following data: a. Sales are budgeted at $255,000 for May. Of these sales, $76,500 will be for cash; the remainder will be credit sales. One-half of a month's credit sales are collected in the month the b. Purchases of inventory are expected to total $189,000 during May. These purchases will all be on account. Forty percent of all purchases are paid for in the month of purchase; 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 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 $77,500 d. Selling and administrative expenses for May are budgeted at $93,600, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $6,250 for the month e. The note payable on the April 30 balance sheet will be paid during May, with $370 in interest. (All of the interest relates to May.) f. New refrigerating equipment costing $8,600 will be purchased for cash during May. g. During May, the company will borrow $29,500 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 1. Calculate the expected cash collections for May 2. Calculate the expected cash disbursements for merchandise purchases for May 3. Prepare a cash budget for May. 4. Prepare a budgeted income statement for May 5. Prepare a budgeted balance sheet as of May 31Explanation / Answer
1-a) Schedule of Expected cash collection Cash sales-May 76,500 Collections on account receivable April 30 balance 72,500 May sales (255000-76500)*50% 89250 total cash recepits 238,250 Schedule of Expected cash disbursements April 30 accounts payable balance 68,000 May purchases (189000*40%) 75600 total cash payments 143,600 1-b) Cash Budget Beginning cash balance 11,100 Add Collections from customers 238,250 total cash available 249,350 less Cash disbursements purchase of inventoru 143,600 selling and administrative expense 93,600 purchase of Equipment 8,600 total cash disbursements 245,800 Excess of cash available over disbursements 3,550 financing: borrowing -note 29,500 Repayments-note -19,400 interest -370 total financing 9,730 Ending cash balance 13,280 Budgeted income statement sales 255,000 cost of goods sold: beginning inventory 37,500 purchases 189,000 goods available for sale 226,500 ending invnetory 77,500 cost of goods sold: 149,000 Gross margin 106,000 Selling and administrative expesne 93,600 Depreciation expense 6,250 net operating income 6,150 interest expesne 370 net income 5,780 Budgeted balance sheet Assets Cash 13,280 Account receivable 89250 inventory 77,500 buildings & equipment,net of depreciaiton 240350 (238000+8600-6250) total Assets 420,380 Laibilities & stockholder's Equity Accounts payable 113400 note payable 29,500 common stock 180,000 Retained earnings (91700+5780) 97,480 total liabilities & stockholders equity 420380