Minden Company is a wholesale distributor of premium European chocolates. The co
ID: 2552550 • 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 Balance Sheet 30 Assets Cash Accounts receivable Buildings and equipment, net of depreciation Total assets s 15,100 74,750 51,750 233,000 374,600 Liabilities and Stockholders' Equity Accounts payable Note payable Common stock Retained earnings 11,500 180,000 09,100 Total liabilities and stockholders' equity 374,600 The company is in the process of preparing a budget for May and has assembled the following data: a. Sales are budgeted at $275,000 for May. Of these sales, $82,500 will be for cash; the remainder will be credit sales. One-half of a month's credit sales are collected in the month the 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 $214,000 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 $87,000 d. Selling and administrative expenses for May are budgeted at $81,300, exclusive of depreciation. These e. The note payable on the April 30 balance sheet will be paid during May, with $585 in interest (Al of the f. New refrigerating equipment costing $10,800 will be purchased for cash during May expenses will be paid in cash. Depreciation is budgeted at $2,750 for the mjonth interest relates to May.) During May, the company will borrow $20,800 from its bank by giving a new note payable to the bank for hat amount. The new note will be due in one year g.Explanation / Answer
Schedule of expected cash collections Cash Sales - May Collections On accounts Receivables 82500 April 30 balance 74750 May sales 96250 Total Cash Receipts 253500 Schedule of expected cash disbursments April 30 accounts payable balance 74000 May Purchase 214000*40% 85600 Total Cash Payaments 159600 Minden Company Cash Budget For the month of May Beginning cash Balance 15100 Add: Collections from customers 253500 Total Cash Available 268600 Less Cash Disbursments Purchse of inventory 159600 Selling and administrative expense 81300 Purchase of equipment 10800 Total Cash Disbursments 251700 Excess of cash available over disbursments 16900 Financing Borrowing Note 20800 Repaying Note -11500 Interest 585 Total Financing 9885 Ending Cash Balance 26785 Minden Company Budgeted Income Statement For the month of May Sales 275000 Cost of goods sold Beginning Inventory 51750 Purchases 214000 Goods available for sale 265750 Ending Inventory 87000 Cost of goods sold 178750 Gross Margin 96250 Selling and administrative Expense (81300+2750) 84050 Net Operating Income 12200 Interest Expense 585 Net Income 12785 Minden Company Balance Sheet For the month of May Assets Cash 26785 Accounts Receivable 96250 Inventory 87000 Buildings and equipment , net of dep (233000+10800-2750) 241050 Total Assets 451085 Liabilities and Stockholder's Equity Accounts Payable (214000*0.6) 128400 Note Payable 20800 Common stock 180000 Retained Earnnings (109100+12785) 121885 Total Liabilities 451085 1-a. Schedule of cash receipts: Collections on account receivable for May sales = (275000-82500) = 50% × $192,500 = $96,250