Minden Company is a wholesale distributor of premium European chocolates. The co
ID: 2567601 • 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:
258,000
387,200
104,750
387,200
Sales are budgeted at $240,000 for May. Of these sales, $72,000 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 $118,000 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 $93,500, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,400 for the month.
The note payable on the April 30 balance sheet will be paid during May, with $160 in interest. (All of the interest relates to May.)
During May, the company will borrow $26,600 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..
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Minden Company is a wholesale distributor of premium European chocolates. The company’s balance sheet as of April 30 is given below:
Explanation / Answer
Minden Company Schedule of Expected Collection Budgeted Sales 240000 Cash Sales of May 72000 Cash Sales 72000 Collections on Account Recievables: Credit 168000 April Collections 75500 (Taken from BS) 50% Collection 84000 May Sales 84000 Total Cash 231500 Minden Company Purchases 118000 Schedule of Expected Cash Disbursements In the month 47200 April 30 accounts payable balance 86750 (Taken from BS) Credit 70800 May purchases 47200 Total cash payments 133950 Minden Company Cash Budget For the Month of May Beginning cash balance 16700 (Taken from BS) Add collections from customers 231500 (Taken from above) Total cash available 248200 Less cash disbursements: Purchase of inventory 133950 (Taken from above) Selling and administrative expenses 93500 (Budgeted & payable in Cash) Purchases of equipment 15000 Given in Notes Total cash disbursements 242450 Excess of cash available over disbursements 5750 Financing: Borrowing—note 26600 Given in Notes Repayments—note 15700 Given in Notes Interest 160 (Taken from BS) Total financing 10740 Ending cash balance 16490 Minden Company Budgeted Income Statement For the Month of May Sales 240000 COGS: Cost of goods sold: 123500 (Working on Right Side) Opening Stock 37000 (Taken from BS) Contribution Margin 116500 Purchases 118000 Given in Notes Less: Operating & Other Expenses Total 155000 Selling and administrative expenses 93500 Less: Closing Stock 31500 Given in Notes Depreciation 2400 COGS 123500 Profit Before Interest 20600 Less: Interest 160 Net transfer to Retained Earnings 20440