Minden Company is a wholesale distributor of premium European chocolates. The co
ID: 2557523 • 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 Cash Accounts receivable Inventory Buildings and equipment, net of depreciation $ 10,000 62,750 32,750 219,000 Total assets $ 324,500 Liabilities and Stockholders' Equity Accounts payable Note payable Common stock Retained earnings $ 69,000 22,700 180,000 52,800 otal liabilities and stockholders' equity $ 324,500 The company is in the process of preparing a budget for May and has assembled the following data a. Sales are budgeted at $254,000 for May. Of these sales, $76,200 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 b. Purchases of inventory are expected to total $137,000 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 $45,000 d. Selling and administrative expenses for May are budgeted at $98,400, exclusive of depreciation. These e. The note payable on the April 30 balance sheet will be paid during May, with $350 in interest. (All of the f. New refrigerating equipment costing $8,700 will be purchased for cash during May. expenses will be paid in cash. Depreciation is budgeted at $5,550 for the month interest relates to May.) g. During May, the company will borrow $27,400 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.Explanation / Answer
1.a. Prepare a schedule of expected cash collections from sales and a schedule of expected cash disbursements for merchandise purchases.
Schedule of expected cash collections:
Cash sales-May
$76200
Collection on accounts receivable:
April 30 Balance
62750
May sales [50% x (254000 – 76200]
88900
Total cash receipts
$227850
Schedule of expected cash disbursement:
April 30 Accounts payable balance
$69000
May purchases(40% x 137000)
54800
Total Cash payments
$123800
1.b.
MINDEN COMPANY
CASH BUDGET
FOR THE MONTH OF MAY
Beginning cash balance
$10000
Add: collections from customer
227850
Total cash available
237850
Less: cash disbursements:
Purchase of inventory
123800
Selling and administrative expenses
98400
Purchases of equipment
8700
Total cash disbursement
230900
Excess of cash available over disbursements
6950
Financing:
Borrowing- note
27400
Repayments- note
(22700)
Interest
(350)
Total financing
4350
Ending cash balance
$11300
2.
MINDEN COMPANY
BUDGETED INCOME STATEMENT
FOR THE MONTH OF MAY
Sales
$254000
Cost of goods sold:
Beginning inventory
32750
Purchases
137000
Goods available for sale
169750
Ending inventory
(45000)
Costs of goods sold
124750
Gross margin
129250
Selling and administrative expenses
(103950)
Net operating income
25300
Interest expense
350
Net income
$24950
3.
Prepare a budgeted balance sheet as of may 31
Assets
Cash
$10000
Account receivable
88900
Inventory
45000
Building & equipment net of depreciation
222150
Total assets
$366050
Liabilities & stock holders’ equity
Accounts payable
82200
Note payable
27400
Common stock
180000
Retained earnings
77750
Total Liabilities & stock holders’ equity
366050
Explanation:
Building & equipment net of depreciation = $219000+$8700-$5550 = $222150
Accounts payable = 60% x $137000 = $82200
Retained earnings = $52800 + $24950 = $77750
Cash sales-May
$76200
Collection on accounts receivable:
April 30 Balance
62750
May sales [50% x (254000 – 76200]
88900
Total cash receipts
$227850