Minden Company is a wholesale distributor of premium European chocolates. The co
ID: 2550217 • 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:
225,000
356,500
78,950
356,500
Sales are budgeted at $231,000 for May. Of these sales, $69,300 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 $139,000 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 $83,400, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $6,200 for the month.
The note payable on the April 30 balance sheet will be paid during May, with $155 in interest. (All of the interest relates to May.)
During May, the company will borrow $24,000 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 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 Company is a wholesale distributor of premium European chocolates. The company’s balance sheet as of April 30 is given below:
Explanation / Answer
Answer 1-a Sales Budget May Sales 231,000 Cash Sales 69,300 Credit Sales 161,700 Budgeted Cash Collections May Cash Sales 69,300 Collection from Accounts Receivables Accounts Receivables - April 77,500 MAy Sales - $161,700 X 50% 80,850 Total cash Collections 227,650 Schedule of Cash payments to Suppliers May Cash Payment Accounts Payable - April 78,250 May Purchases - $139,000 X 40% 55,600 Total Cash Payment to Suppliers 133,850 Answer 1-b. Cash budget Oct Opening cash Balance 12,000 Add: receipts Collection from Customers 227,650 Note Payable Issued 24,000 Total Cash available 263,650 Less: Disbursements Cash Disbursement - Accounts Payable 133,850 Selling & Admn. Exp. - $83,400 - $6,200 77,200 Note Payable Paid 19,300 Interest on Notes Payable 155 Refrigerating Equipment Purchased 12,500 Total Disbursement 243,005 Cash Balance Closing 20,645 Answer 2. Income Statement For the Month Ending May 31 Sales 231,000 Cost of Goods Sold Beginning Inventory 42000 Add: Purchases 139000 Goods Available for Sale 181000 Less: Ending Inventory 55000 126,000 Gross Margin 105,000 Less: Selling & Admn. Exp. 83,400 Net Operating Income 21,600 Less: Interest Expense 155 Net Income 21,445 Answer 3. Balance Sheet As on Oct 31 Assets Current Assets Cash 20,645 Accounts receivables 80,850 Inventory 55,000 156,495 Fixed Assets Building & Equipment 225,000 Add: Purchase Refrigerating Equip. 12,500 Less: Depreciation (6,200) 231,300 Total Assets 387,795 Liabilities & Stockholders' Equity Liabilities Current Liabilities Accounts Payable 83,400 Note Payable 24,000 107,400 Long Term Liabilities - Total liabilities 107,400 Shareholders's Equity Common Stock 180,000 Retained Earnings 100,395 Total Stockholders equity 280,395 Total liabilities & Stockholders' Equity 387,795 Schedule of Retained Earnings As on May 31 Opening Balance 78,950 Add: net income 21,445 Closing Balance 100,395