Minden Company is a wholesale distributor of premium European chocolates. The co
ID: 2560018 • 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 $ 18,700 Accounts receivable 70,250 Inventory 41,250 Buildings and equipment, net of depreciation 230,000 Total assets $ 360,200 Liabilities and Stockholders’ Equity Accounts payable $ 72,250 Note payable 13,700 Common stock 180,000 Retained earnings 94,250 Total liabilities and stockholders’ equity $ 360,200 The company is in the process of preparing a budget for May and has assembled the following data: Sales are budgeted at $214,000 for May. Of these sales, $64,200 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 May. Purchases of inventory are expected to total $122,000 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 $47,500. Selling and administrative expenses for May are budgeted at $85,500, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,050 for the month. The note payable on the April 30 balance sheet will be paid during May, with $390 in interest. (All of the interest relates to May.) New refrigerating equipment costing $16,300 will be purchased for cash during May. During May, the company will borrow $24,500 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.
Explanation / Answer
Minden Company Sales & Collection Budget Month May Total Sales 214000 Cash Sales 64200 Collections: In the Month(50%) 74900 In the Following Month(50%) 70250 Total Collections 209350 Minden Company Purchase & Cash Disbursement for Purchases Budget Purchases 122000 Payments: In The Month(40%) 48800 In The Following Month(60%) 72250 Total Cash Disbursement 121050 Minden Company Cash Budget Months May Beginning Cash 18700 Add: Collections 209350 Total Cash Available 228050 Less: Cash Payments: Payment to Supplier 121050 Selling & Admin 85500 Note Payable With Int 14090 Equipment 16300 Total Cash Disbursements 236940 Increase/Decrease in Cash -8890 Financing: Borrowings 24500 Repayments Interest on Loan Total Financing 24500 Closing Cash 15610 Budgeted Income Statement for the period ending on May 31 Particulars Sales 214000 Less: COGS 115750 Contribution Margin 98250 Less: Other Costs Selling & Admin 85500 Depreciation 2050 Interest on Borrowings 390 Net Contribution 10310 Less: Proposed Dividends 0 Transfer to Reserves 10310 Balance Sheet as at May 31 Assets Cash 15610 Closing Cash Account Recievables 74900 Half of Month Cr Sales Inventory 47500 Given Property & Equipment Net 244250 Ope+Purc-Dep Total Assets 382260 Liabilities & Stockholder's Equity Account Payable 73200 60% of Month Cr Pur Note Payable 24500 Taken during the month Common Stock 180000 Retained Earnings 104560 Op+earned Dur the month Total 382260 0