Chapter 7 HW A Cash Budget, By Quarters, Is Minden Company is a wholesale distri
ID: 2557490 • Letter: C
Question
Chapter 7 HW A Cash Budget, By Quarters, Is 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 S 16,500 67,000 32,000 249,000 Cash Accounts receivable Buildings and equipment, net of depreciation Total assets $ 364,500 Liabilities and Stockholders' Equity $ 68,750 20,500 180,000 95,250 Accounts payable Note payable Common stock Retained earnings Total liablities and stockholders' equity $ 364,500 The company is in the process of preparing a budget for May and has assembled the following data: a. 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 b. Purchases of inventory are expected to total $191,000 duning 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 Apri 30 accounts payable to suppliers will be paid during May c. The May 31 inventory balance is budgeted at $86,000 d. Selling and administrative expenses for May are budgeted at $78,200, exclusive of depreciation. These expenses will be pald in cash. Depreciation is budgeted at $5,300 for the month e. The note payable on the April 30 balance sheet wil be paid during May, with $170 in interest. (All of the nterest relates to May.) f. New refrigerating equipment costing $6,600 will be purchased for cash during May g. During May, the compary 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 5Explanation / Answer
1. expected cash collections
Cash sales in may = 72300
Collections on accounts receivables:
April 30 = 67000
may [168700 * 1/2] = 84350
Total cash collection = $223650
2. expected cash disbursements :
April 30 accounts payable balance = 68750
May purchase (191000*40%) = 76400
Total cash disbursements = 145150
3. Cash budget
Beginning cash balance = 16500
Add: cash collection = $223650
Total cash available = 240150
less: cash disbursement :
purchase of inventory = 145150
selling and administrative expense = 76200
purchase of equipment = 6600
Excess of cash available over disbursements = 12200
Financing:
Borrowing- note = 27000
repayment - note = (20500)
interest = (170)
Ending cash balance = $18530
4. income statment
sales = 241000
less: cost of goods sold = 137000
[32000 + 191000 - 86000]
Gross profit = 104000
less: Depreciation = 5300
less: interest = 170
less: selling and administrative = 76200
Net income = 22330
5. Balance sheet
Assets
Cash $18530
Inventory 86000
Accounts receivable 84350
Building and equipment ,net of depreciation
[249000 + 6600 - 5300] 250300
Total Assets $439180
Liabilities and shareholder's equity
Accounts payable 114600
Notes payable 27000
Common stock 180000
Retained earnings [95250 + 22330] 117580
Total Liabilities and shareholder's equity $439180