Minden Company is a wholesale distributor of premium European chocolates. The co
ID: 2568304 • 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 $ 9,100 77,250 40,000 239,000 Total assets 365,350 Liabilities and Stockholders' Equity Accounts payable Note payable Common stock Retained earnings $ 79,750 12,300 180,000 93,300 Total liabilities and stockholders' equit 365,350 The company is in the process of preparing a budget for May and has assembled the following data a. Sales are budgeted at $266,000 for May. Of these sales, $79,800 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 $170,000 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 $44,500. d. Selling and administrative expenses for May are budgeted at $81,900, exclusive of depreciation. These e. The note payable on the April 30 balance sheet will be paid during May, with $140 in interest. (All of the f. New refrigerating equipment costing $9,600 will be purchased for cash during May. expenses will be paid in cash. Depreciation is budgeted at $6,450 for the month interest relates to May.) g. During May, the company will borrow $23,400 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) Schedule of expected cash collections Cash sales-May 79800 Collections on account receivable: April 30 balance 77250 May sales 93100 Total cash receipts 250150 Schedule of expected cash disbursements April 30 accounts payable balance 79750 May purchases 68000 Total cash payments 147750 1-b) Cash Budget Beginning cash balance 9100 Add: Collection from customers 250150 Total cash available 259250 Less: Cash disbursement: Purchase of inventory 147750 Selling and administrative expenses 81900 Purchases of equipment 9600 Total cash disbursements 239250 Excess of cash available over disbursements 20000 Financing: Borrowing --Note 23400 Repayments--Notes -12300 Interest -140 Total financing 10960 Ending cash balance 30960 2) Budgeted Income Statement Sales 266000 Cost of goods sold: Beginning inventory 40000 Purchases 170000 Goods available for sale 210000 Ending inventory 44500 Cost of goods sold 165500 Gross margin 100500 Selling and administrative expenses 81900 Depreciation 6450 88350 Net operating income 12150 Interest expense 140 Net income 12010 3) Budgeted Balance Sheet ASSETS Cash 30960 Accounts receivable 93100 Inventory 44500 Buildings and equipment, net of depreciation (239000+9600-6450) 242150 Total assets 410710 LIABILITIES & STOCKHOLDERS' EQUITY Accounts payable 102000 Notes payable 23400 Common stock 180000 Retained earnings (93300+12010) 105310 Total liabilities and stokholders' equity 410710