Minden Company is a wholesale distributor of premium European chocolates. The co
ID: 2549410 • 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:
The company is in the process of preparing a budget for May and has assembled the following data:
Sales are budgeted at $241,000 for May. Of these sales, $72,300 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 $191,000 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.
The May 31 inventory balance is budgeted at $86,000.
Selling and administrative expenses for May are budgeted at $76,200, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $5,300 for the month.
The note payable on the April 30 balance sheet will be paid during May, with $170 in interest. (All of the interest relates to May.)
New refrigerating equipment costing $6,600 will be purchased for cash during May.
During May, the company will borrow $27,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.
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 31.
Minden CompanyBalance Sheet
April 30 Assets Cash $ 16,500 Accounts receivable 67,000 Inventory 32,000 Buildings and equipment, net of depreciation 249,000 Total assets $ 364,500 Liabilities and Stockholders’ Equity Accounts payable $ 68,750 Note payable 20,500 Common stock 180,000 Retained earnings 95,250 Total liabilities and stockholders’ equity $ 364,500
Explanation / Answer
Ans 1 Schedule of Expected Cash Collections May Total sales T $241,000 From accounts Receivable $67,000 Cash Sales 72300 From May sales (241000-72300)*50% 84350 Total expected cash Collections $223,650 ans 2 Schedule of Expected Cash Disbursements- Jan Accounts payable $68,750 From May purchases (191000*40%) $76,400 Total Disbursements $145,150 ans 3 Cash Budget May Beginnning Cash Balance 16,500 Add Cash Collections 223,650 Add: Borrowings from Notes payable 27,000 Total Cash Avail 267,150 Less Cash Disbursements For Inventory $145,150 For Selling & Adm Expenses 76200 Payment of Equipment 6600 Payment of Notes payable 20500 Payment of Interest 170 Total Cash Disbursements $248,620 Excess(Deficiency) of Cash $18,530 Ending Cash Balance $18,530 ans 4 Budgeted Income statement sales $241,000 Less;: Cost of Good sold (32000+191000-86000) 137000 Gross profit $104,000 Less: S & A exp (76200+5300) 81500 Net operating income $22,500 Interest exp 170 Net Income $22,330 Minden Company Budgeted Balance Sheet 31-May Assets Cash $18,530 Accounts receivable 84350 Inventory 86000 Buildings and equipment, net of depreciation 250300 (249000+6600-5300) Total assets $439,180 Liabilities and Stockholders’ Equity Accounts payable (191000*60%) 114600 Note payable 27000 Common stock 180000 Retained earnings (95250+22330) $117,580 Total liabilities and stockholders’ equity 439180